

SPECIAL REPORT 


OF THE 



North Dakota Tax Commission 

on Assessment of Railroads 
in North Dakota 


TO THE 


Governor, Legislature 


AND THE 


State Board of Equalization 


OF THE 


State of North Dakota 


1915 


F. E. PACKARD, 

G. E. WALLACE, 

H. H. STEELE, 

Commissioners. 
C. R. KOSITZKY, 

Secretary. 


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Jit - 


























REPORT TO THE 


NORTH DAKOTA TAX COMMISSION 

ON THE 


ASSESSMENTS OF RAILROADS 
IN NORTH DAKOTA 


BY 

E. DANA DURAND 

Ex Director of the Federal Census and Professor of Economics 
University of Minnesota 


ESTIMATED TRUE COMMERCIAL VALUE OF THE 
GREAT NORTHERN, NORTHERN PACIFIC 
AND MINNEAPOLIS, ST. PAUL AND 
SAULT STE. MARIE RAILWAYS, 

AND OF NORTH DAKOTA’S 
SHARE THEREOF 


F. E. PACKARD, 

G. E. WALLACE, 

H. H. STEELE, 

Commissioners. 
C. R. KOSITZKY, 

Secretary. 




LETTER OF TRANSMITTAL 


To Honorable L. B. Hanna, Governor, the Legislature, and the Honorable 
Members of the State Board of Equalization of the State of North 
Dakota: 

We transmit herewith a special Report of the North Dakota Tax 
Commission on the assessment of railroads in North Dakota. This report 
consists largely of the investigations of E. Dana Durand and contains 
valuable information upon the subject of railroads in their relation to 
taxation in North Dakota. The report is made at this time so that it may 
be considered by you while sitting as the State Board of Equalization, and 
we trust it will be of some value to you in solving the difficult problem of 
arriving at a fair and just valuation of the railroads of the state. 

Respectfully submitted, 

F. E. PACKARD, 

GEO. E. WALLACE, 

H. H. STEELE, 

Commissioners. 


C. R. Kositzky. Secretary. 










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RECOM M EN DAT10NS OF THE STATE TAX COMMISSION 


August 19, 1915. 

To the Honorable State Board of Equalization, 

Bismarck, North Dakota. 

Gentlemen: — 

At your annual meeting during the year 1914 the Tax Commission pre¬ 
sented to you certain recommendations relative to the assessment of the 
principal railroads in this state. This compilation was arrived at after 
weeks of labor and research. In our compilation we found that the North¬ 
ern Pacific, Great Northern, Soo and Milwaukee railroads should be mate¬ 
rially increased for assessment purposes. At that time we calculated that 
the increase would be in the neighborhood of eighteen million dollars 
assessed valuation. This year we have been so fortunate as to obtain the 
services of E. Dana Durand, ex-director of the United States Census and 
head of the Department of Economics and Political Science of the Univer¬ 
sity of Minnesota. No one can dispute his authority in the matter of railway 
valuations. There is none better in the Nation. Attached hereto we hand you 
his full report of the first three railroads above named. He sent us his report 
on the Chicago, Milwaukee & St. Paul Railway after the data on the first 
three railways had been printed. The information used in making this 
compilation is taken entirely from the report of the railways to the North 
Dakota Railway Commission. The figures on the Milwaukee system are 
submitted to you in typewritten form. You will notice therein that he 
recommended the Milwaukee system to be assessed on an average with 
the assessment of the three principal railways of the state. 

The methods used by Dr. Durand in arriving at the physical values of 
the railways of the state are two-fold, taking the average of the two. 
These methods are fully described and explained in the text. He determines 
that the commercial value of the Great Northern railway in this state 
is $100,632,214; the Northern Pacific, $84,960 620, and the Soo, $44,725,478. 
Reducing this to a twenty-five per cent basis, which has been uniformly 
recommended by this Commission to all assessors, boards of review and 
boards of equalization in this state, we find that the Great Northern should 
be assessed on its entire line in this state $25,158,053; the Northern 
Pacific, $21 240,155, the Soo $11,181,369, and the Milwaukee, $4,537,137, 
making a total of $62,116,714. 

The assessment of the Milwaukee is in accordance with Dr. Durand’s 
report. It is based upon the average of the other three railways in the 
state, namely at $12^010 per mile on 377.78 miles, which does not take into 
consideration the sidings. 

The compilation herewith submitted has been figured entirely separate 
from our report to your honorable body for the year 1914 and has been 
reached through the means of averages of standard methods of placing 
values upon this class of property. Although figured from some¬ 
what a different angle from the method used by us a year ago, we find 



that the figures of Dr. Durand’s show that the railroads of this state 
should be raised over the assessment of 1914 to an amount a little in 
excess of seventeen million dollars, thus fully justifying our recommenda¬ 
tions of a year ago. 

There are some other railroads in the state insignificant in mileage. 
We have no recommendations as to those, but on the assessment for the 
year 1915 of the four principal railroads of the state, we recommend that 
they be assessed in accordance herewith. 

Respectfully submitted, 

NORTH DAKOTA TAX COMMISSION, 

By F. E. Packard, 

Geo. E Wallace. 


BY COMMISSIONER STEELE— 

I do not join in the foregoing recommendations for the reason that 
being a new member of the Commission, I have not given to the subject 
of the railroads of the state the study and consideration it should have 
and which has been given to it by the senior members of this Commission, 
and I do not feel myself qualified to make specific recommendations with¬ 
out a thorough study and investigation. 

However, what investigations I have made from different sources leads 
me to believe that certain of the railroad properties of the state should be 
raised, notably that of the Northern Pacific, which appears from all angles 
to be under-assessed. Further, that certain portions of the Great Northern 
and Milwaukee roads should be raised. 

The laws of our state provide for the assessment of the railroad fran¬ 
chise. In your action upon the assessment of railroads I believe you should 
consider the franchise and the earning power of the railroad, together 
with its ability to pay, as factors in determining the amount of your 
assessment. 

Respectfully, 

H. H. STEELE. 


REPORT ON ASSESSMENT OF RAILROADS IN NORTH DAKOTA 


Scope 

• This report deals primarily with the assessment of the Great Northern, 
Northern Pacific, and the Minneapolis, St. Paul & Sault Ste. Marie (here¬ 
after called the “Soo Line”) railroads. The mileage of the other railroads 
in the state is so small that their assessment is a matter of much less 
importance. Moreover in the case of the Chicago, Milwaukee & St. Paul, 
and the Chicago & North Western railroads the proportion of total mile¬ 
age which lies in North Dakota is so slight that the application of the 
unit system of valuation and the apportionment of a proper share thereof 
for North Dakota affords a less satisfactory basis than for the three rail¬ 
roads first named. 

The object of this report is chiefly to ascertain the true value of (.hat 
part of the property of railroads which lies in North Dakota. What pro¬ 
portion of true value should be entered on the assessment rolls is another 
matter, depending upon the general policy of the state with reference to 
the rate of assessment of property. 



4 


ASSESSMENTS OF RAILROADS 


THE UNIT SYSTEM OF VALUATION 

North Dakota Statutes virtually require unit valuation. 

The tax statutes of North Dakota require the State Board of Equaliza¬ 
tion in assessing railroads to assess the value of the franchise as well as 
that of the road bed, rails, rolling stock, etc. Without going into a techni¬ 
cal discussion of the meaning of the word franchise, it may be said that 
economists and courts generally agree in substance that the value of a 
franchise is the excess of the total value of a corporation as a going con¬ 
cern over the physical value of its assets. By requiring the assessment 
of the franchise, the statute virtually requires the determination of the 
total value of the property of a railroad as a going business. This value, 
hereinafter for brevity called “commercial value” may be found to exceed 
the physical value of railroad property or it may be found to fall below 
that value. 

Commercial Value of property basis of taxation where it exceeds physical 
value. 

It requires no argument to show that the commercial value is a truer 
index to the tax paying ability and a more just basis for assessment than 
the physical value, at least, in those cases where the commercial value 
exceeds the physical value. 

In the first place by assessing the commercial value of railroads the 
state places them on the same basis as land, which constitutes the great 
bulk of the taxable property of the state. There is no such thing as a 
physical value of land or value independent of its capacity to produce 
income. The value of farm land may rise or fall with the mere change 
in prices of products derived from it, and without the slightest change in 
the characteristics of the land itself or without the slightest addition there¬ 
to or subtraction therefrom. As a matter of fact, the great increase in the 
assessment of farm lands in North Dakota in the last decade or so has 
been primarily due to the increase in commercial value, due in turn chiefly 
to higher prices of farm products. Land sells on the basis of the capi¬ 
talization of its annual productive power. This does not mean, of course, 
that the value of any particular farm is the capitalization of the actual 
income derived by the owner. The degree of skill and energy with 
which he tills the land, greatly affect that income. The value is the 
capitalization of that which the average farmer considered as a buyer 
thinks he could get out of the land. 

It is obviously unjust that the farmer should have to pay more taxes 
when his farm becomes more profitable through the advance of prices, 
if the railroad companies pay no more taxes when their property be¬ 
comes more profitable through the increase of traffic or other causes. 
The true value of a railroad, like that of a farm, is what it would sell 



IN NORTH DAKOTA 


5 


for. What it would sell for may bear very little relation to what it orig¬ 
inally cost or what it would cost to reproduce it at the present time. 
If a railroad enjoys high rates, abundant traffic, and low operating ex¬ 
penses, the commercial value may greatly exceed the mere physical 
value of the land which it occupies, the grading, the rails, the rolling 
stock, and other tangible property. 

The principle of valuing railroads on the commercial basis is quite 
generally recognized in the tax laws of the various states, in court 
decisions, and by practically all tax officials, and is uniformly upheld by 
economists and students of finance. Many other states have provisions 
like that of North Dakota requiring the assessment of the franchise, 
or requiring the value of the franchise to be taken into account in de¬ 
termining the total value of the railroad property. In other states laws 
require the market value of stocks and bonds to be taken into account 
or expressly direct other evidences of going commercial value to be 
considered. 

Where commercial value exceeds physical value detailed valuation of 
physical property becomes unnecessary. 

It is one of the advantages of a commercial valuation of railroads 
that it can be made more readily than a physical valuation. Moreover, 
the great railroad systems lying in North Dakota expressly state in their 
reports to the State Railroad Commission that they do not know the 
actual cost of their lines lying in that state. This is in no way remark¬ 
able as the railroad systems are not built by state lines and construc¬ 
tion accounts are not kept by state lines. In the absence of records on 
the original cost the only manner for ascertaining the physical value of 
the property of railroads lying in the state is by the employment of 
expert engineers to go over the lines and in the greatest detail calculate 
the cost of rights of way, grading, bridges, rails, stations, and what not. 
In states like Michigan and Wisconsin such physical valuations have 
been attempted and the process has been found exceedingly expensive. 

While the North Dakota statute regarding the taxing of railroads pos¬ 
sibly implies that there should be separate assessment of the different 
elements of tangible property and the separate assessment of franchise 
value, it does not appear to have been the practice of the State Board 
of Equalization to make such distinction of different elements of value. 
Since the rate of taxation is the same on all elements of value there 
seems to be no particular advantage in separating them if a correct 
total for all elements combined can be ascertained. This correct total 
in the case of a railroad whose commercial value equals or exceeds the 
probable physical value is simply commercial value, and having once 
been ascertained, there is no need of determining those fractions of the 
total which would require detailed physical valuation. 

A somewhat different question may arise in the case of railroads, if 
there be any in the state, whose commercial value is less than Its 
physical value. Something may be said for the principle of assessing 
such a railroad on the basis of physical value even though it has rela- 



6 


ASSESSMENTS OF RAILROADS 


tively little income out of which to pay taxes. The road has the 
benefit of the services of the state and local governments, a benefit at 
least equal to the tax rate upon the physical value of the property. 
However, as there is every reason to believe that the three leading rail¬ 
roads of the state, the Great Northern, the Northern Pacific, and the 
Soo Line, have a commercial value at least equal to their physical value, 
and that the taxation of their commercial value will bring a just and 
adequate revenue to the state. 

Commercial valuation requires the valuation of the railroad system as 
a whole. 

It is evident that the true commercial value of a railroad is its value 
as an entity and that a direct commercial valuation of that part of a 
railroad which lies within a given state is impossible. It might have 
been possible for railroads to keep construction accounts in such a way 
as to determine exactly the original cost of the lines in a given state, 
though as a matter of fact they have not done so. It might also be pos¬ 
sible to determine the physical cost of the reproduction of the property 
of a railroad lying within state boundaries, but the value of a railroad 
as a going concern is not to be broken up by state lines. It is a unity. 
All parts of a system co-operate in producing the income which forms 
the basis of the commercial value. The terminals of the great north¬ 
western railroads in cities like St. Paul, Minneapolis, and Duluth, are 
largely engaged in handling grain and other products originating in 
North Dakota. The freight rate which is paid for shipment from North 
Dakota to Minneapolis includes indistinguishably the charge for the haul 
within the state of North Dakota, within the state of Minnesota, and the 
cost of handling at the terminals, and the profit from the transaction is 
one unit. 

On this point we may quote from Mr. T. A. Polleys, Tax Commission¬ 
er of the Chicago, St. Paul, Minneapolis & Omaha Railway, who said at 
the National Conference on State and Local Taxation in 1910: “The 
railway system is the proper unit for the valuation of railway property. 
It is first necessary to determine the value of a railway as an entirety 
before it is possible to logically assign a value to that portion of its lines 
lying within a given state.” (page 247). Many other representatives of 
railroads, as well as state taxing authorities and students of public 
finance, might be quoted to the same effect. 



IN NORTH DAKOTA 


7 


THE DOUBLE PROBLEM OF RAILROAD ASSESSMENT 


It follows from what has been said that the first task confronting 
the tax authorities of North Dakota in assessing the railroads is to de¬ 
termine the value of each railroad system as an entirety. It is obvious, 
however, that not all of that value is a proper subject for taxation in 
North Dakota. The second task is to determine a fair method of ap¬ 
portioning the total value as between North Dakota and other states. 
We shall first discuss the means of arriving at the commercial value of 
railroads as systems; second discuss the various principles for the 
apportionment of that value among states. 




8 


ASSESSMENTS OF RAILROADS 


METHODS OF DETERMINING TOTAL VALUE OF RAILROAD 

SYSTEMS 

The valuation must relate to property used for railroad purposes only. 

Whatever method of valuation is adopted for the railroads, it is 
necessary to distinguish between the value of property actually used for 
railroad purposes and the value of other property held by the railroad 
corporations, which in the case of some of these railroads is very large 
in amount. Such other property, if it lies within the state of North 
Dakota, will be separately assessed; if it lies outside the state it is not 
a proper subject for taxation by North Dakota. The most important 
kind of property owned by these railroad companies other than that used 
in railroad operation consists of stocks and bonds of other railroad cor¬ 
porations. For example, the Great Northern and Northern Pacific each 
own more than $100,000,000 worth (book value) of the stock of the 
C. B. & Q. R. R., no part of which railroad lies in North Dakota. In all 
calculations herewith presented the value of such non-railway property 
has been excluded. 

Probable excess of commercial over physical valuation of the three leading 
railroads. 

Since there may be some argument in favor of assessing railroads 
on the basis of physical value if that value exceeds commercial value, \t 
is desirable, first, to consider the evidence going to show that the com¬ 
mercial value is the higher. This evidence is only indirect. We might, 
to be sure, compare the commercial value directly with the book value 
of assets (excluding non-railway investments) as shown in balance 
sheets of companies; as a matter of fact, some use is made of this book 
Value in subsequent calculations. There is no way of knowing, however, 
that the book value of assets corresponds to the original cost of a rail 
road and its other assets. It has been very common for American rail¬ 
roads to over-capitalize—issuing securities in excess, sometimes far in 
excess, of actual investment. Where this is done, they ordinarily make 
their balance sheets balance by counting the cost of the road at more 
than its actual cash cost. Whether this has been the case with the leading 
railroads of North Dakota, there is no adequate evidence to show, and 
it is not worth while to enter into such meager evidence as is available. 

Books of the corporations, therefore, can not be relied upon to show 
* the physical value of their property, nor has there been any complete 
physical valuation of that property by any public authority. The Inter¬ 
state Commerce Commission is engaged in valuing the railroads of the 
United States but has not completed the task. The state of Minnesota 
has made a physical valuation of the railroads within its boundaries, but 
this would throw little light upon the value of North Dakota roads. In 



IN NORTH DAKOTA 


9 


suits affecting the rates of some of these railroads in the state of Min¬ 
nesota, evidence was submitted by the representatives of the railroads, 
purporting to estimate the approximate cost of reproducing the entire 
systems at the present time. This is referred to more fully later. It 
was contended by the Railroad Commission of Minnesota that that part 
of valuations assigned to state of Minnesota was too high and this con¬ 
tention was upheld by the Supreme Court of the United States. It will 
be understood, of course, that railroads have a motive for representing 
the physical value of their property at a high figure when the question 
of the reasonableness of rates for freight and passenger traffic is under 
discussion, though they not infrequently take the opposite course when 
discussing the value of their property for the purpose of taxation. While 
the claims of railroads with regard to the physical value of their prop¬ 
erty are interesting and may properly be given some consideration in 
assessing them, a more just and more reliable basis will be found in 
commercial value. 

Indirect evidence that the commercial value of the leading railroads 
of North Dakota is probably not less and may be materially more than 
the physical value may be drawn from the statistics regarding the op¬ 
erating results of these systems as compared with those of railroads in 
general and other individual railroads. Such comparisons seem to indi¬ 
cate that the Northern Pacific and Great Northern lines are among the 
most prosperous in the United States and the Soo Line scarcely less so. 
These statistics, which are all taken from the official reports of the 
Interstate Commerce Commission, clearly indicate the desirability of 
considering something more than the mere cost of construction and 
equipment in determining the true value of Ndrth Dakota railroads. It 
should be remarked that all statistics hereinafter presented regarding 
the railroads of North Dakota, and regarding other railroads relate to 
the fiscal years ending June 30th. For brevity this fact will not herafter 
be mentioned but the statistics will be spoken of as for 1912, 1913, 1914, 
etc., meaning the periods ending June 30th in those respective years. 

Table 1 shows for the years 1912, 1913, 1914, so far as statistics are 
available, the leading items regarding the operating results of the Great 
Northern, Northern Pacific, and Soo Railroads in comparison with all the 
railroads of the United States taken together, with all the railroads of 
the western section of the country taken together, and with all the railroads 
of the western section, not including these three railroads, figures for 
which, of course, constitute a material element in the total. Data are 
given, not merely for the entire systems of these railroads, but also for 
that part of each lying in North Dakota, although for reasons hereinafter 
set forth, (see pages 25-27) some of the data for North Dakota are 
necessarily less trustworthy, involving, as they do. x important assump¬ 
tions as regards the apportionment of earnings and expenses among the 
states. 

This table shows that the gross operating revenues (that is, the total 
receipts from transportation) per mile of line for the three leading rail- 



10 


ASSESSMENTS OF RAILROADS 


roads of North Dakota are somewhat less than for the United States, 
as a whole. This might be expected from the sparseness of the popula¬ 
tion in the territory in which they lie, which naturally results in traffic 
of only moderate density. On the other hand, in each of the three years 
the Northern Pacific and the Great Northern show greater net operating 
earnings per mile (excess of receipts over operating expenses) than the 
United States as a whole. The net earnings of these two roads are in 
the neighborhood of 40% of their total earnings while for the United 
States as a whole the net earnings are only about 30% of the gross earn¬ 
ings. For the Soo Line this ratio is only slightly less favorable than for 
the other two roads. The reason for the greater net earnings per mile 
of line on the Northern Pacific and Great Northern as compared with the 
United States as a whole, is doubtless to be found largely in the excep¬ 
tionally heavy trainloads hauled. The average freight train load on the 
Northern Pacific Road is about J greater than the average for the United 
States as a whole and the average for the Great Northern nearly \ 
greater. As a result of these heavy train loads, and also of the fact 
that the average rates for freight per ton per mile are somewhat higher 
on these roads than in the United States as a whole, it appears that the 
average freight revenue per train mile is very much higher for these 
roads. 

Still more striking comparisons may be made between the three 
leading railroads of North Dakota and the railroads of the western dis¬ 
trict of the United States exclusive of these three roads. The western 
district includes all lines west of Lake Michigan and a line extending 
from Chicago to St. Louis, thence down the Mississippi River. As re¬ 
gards every item shown comparatively in table, save the one item of the 
average freight rate per ton per mile, the figures for these two railroads 
are higher than for the western district exclusive of them. Thus for 
the year 1913 the operating earnings per mile of line for the Northern 
Pacific were $4,473. and for the Great Northern $4,272, while for the 
other roads of the western district taken together, the average was 
$3,030. In the same year the average freight revenue per train mile 
on the Northern Pacific was $4.54, and on the Great Northern $4.86 as 
compared with $3.28 on the remaining roads of the western district— 
and this, in spite of the fact that the average freight rate per ton per 
mile is materially lower for the two North Dakota roads than for the 
others. 

The latter part of Table 1 furnishes another means of judging the 
relative profitableness of the North Dakota railroads as compared with 
others. It relates to the payment of dividends on stock. The compari¬ 
sons are possible only betwen these roads individually and the roads 
of the United States as a whole as the reports do not distinguish the 
several districts with respect to dividends. It appears that in the United 
States, as a whole, only about % of the stock of railroad companies pays 
dividends at all, while all three of the North Dakota railroads have for 
many years paid liberal dividends on their entire capital stock. The average 
rate of dividends on these stocks which pay dividends is approximately the 



IN NORTH DAKOTA 


11 

same for the United States, as a whole, as for these railroads, but if the 
rate of dividends be computed with reference to all stock, including non¬ 
dividend stock the average is only about % as high for the United States 
as a whole, as for the Northern Pacific, Great Northern, and Soo lines, 
namely somewhat over 4% compared with 7%. As pointed out in the 
note to the table, the normal average dividend on all stock for the United 
States, as a whole, for 1914, is about 4.2%, the'actually higher percent¬ 
age paid being due to the distribution of certain assets of the Union Pa¬ 
cific and the Southern Pacific. 

Table 2 presents somewhat more detailed comparisons between the 
Great Northern, Northern Pacific and the Soo lines, and the other leading 
individual railroads of the West. This table includes all important lines of 
the western district. Inasmuch as the rate of dividends of an individual 
railroad in a given year may be little indication of its profitableness 
in that year—dividends often being paid out of surplus, particularly 
in the last few years—a calculation has been made in this table of the 
percentage which the “net corporate income” of each company bears to 
its capital stock, the net corporate income being a different item from 
the net operating earnings. It takes into account the income from other 
sources, such as dividends or interest on securities held, but, on the 
other hand important payments such as the large item of interst on 
funded debt are deducted. The net income, in other words, is the 
amount available for distribution to stock holders out of the business of 
the year. This may be more than the amount of dividends paid, part of 
the income being carried to surplus, or it may be less than the dividends 
paid, which may have come in part from the surplus of previous years. 

It is not contended that the ratio of net income to capital stock is a 
very close index of the profitableness of railroads inasmuch as the capi¬ 
tal stock is often not an accurate indication of the true investment. 
Nevertheless, when so many railroads are compared some light as to 
their relative profitableness can doubtless be drawn from these percent¬ 
ages. 

This table speaks for itself. Very few of the roads of the western 
district show operating results in any respect as satisfactory as do the 
Northern Pacific, Great Northern, and Soo lines. In nearly all cases the 
average gross earnings and the average net earnings per mile are lower 
for the other roads than for these three. In nearly all cases the ratio 
of net to gross earnings is lower. The freight train loads are heavier 
on the three leading roads of North Dakota than upon almost any other of 
the roads compared and the freight revenue per train mile is also higher. 
Finally, there are very few among the many railroads represented which 
show as high a ratio of net income to capitalization as do the Great 
Northern, Northern Pacific and Soo Line. The Union Pacific, Southern 
Pacific and the Santa Fe which operate under conditions very similar 
to those on the Great Northern and Northern Pacific, show results equal¬ 
ly favorable, or in some cases more favorable, but these are almost the 
only exceptions. Especially noteworthy is the comparison between the 
Great Northern and Northern Pacific lines on the one hand and even 



12 


ASSESSMENTS OF RAILROADS 


such great and prosperous railroads as the Chicago & Northwestern and 
the C., M. & St. P. 

It is obvious from these two tables, therefore, that the leading rail¬ 
roads of North Dakota are exceptionally prosperous and successful. 
Even in the absence of any precise information as to the physical value 
of their properties, there can be little doubt that their earnings repre¬ 
sent an ample return upon that value, and that their commercial value 
resulting from the earnings must be fully equal to, if it does not materi¬ 
ally exceed, the original cost of the lines and equipment, or even the 
cost of reproduction at the present time which probably exceeds the 
original cost. To assess the railroads of North Dakota on the basis of 
any rough estimate of the original cost or even of the cost of reproduc¬ 
tion, without taking regard to their earning capacity, would clearly be to 
run the risk of assessing them too lightly. 

Capitalization of net earnings or of total net revenue. 

There are two principal methods available for determining the com¬ 
mercial value of a railroad system. One is to capitalize its earning 
capacity and the other to ascertain the market value of its securities. 
In each case, of course, the valuation should be confined to property 
used for railroad operation. 

In the capitalization of earning capacity, two questions present them¬ 
selves: 1. What is the figure of earnings to be capitalized? 2. At what 
rate percent should they be capitalized? 

1. The most convenient figure of earnings to take for the purpose of 
capitalization is the item, “Net revenue from railroad operations,” an 
item which appears in the balance sheet of every railroad and which 
represents the difference between the gross receipts from transportation 
and the operating expenses. This figure is convenient because it re¬ 
quires no analysis of details. Moreover in the case of the Great North¬ 
ern, Northern Pacific, and the Soo Line, there is no great difference be¬ 
tween the net revenue from rail operations and the total net revenue 
taking into account other factors. The net revenue from rail operations 
of the three leading railroads of North Dakota is shown as the first item 
of the condensed income account, for the years 1909, 1910 and 1912-14 
hereinafter presented (Table 11). For the purpose of estimating the 
present commercial value of these railroads the average net earnings 
for the three years 1912-14 may best be taken. To take the latest year only 
would result in undue fluctuations in the assessment. 

Table 3 presents the required items for the calculation for the Great 
Northern, Northern Pacific, and the Soo Line of the total net revenue 
for the years 1912-14, which furnishes an alternative basis for valuation. 
This item may be more precisely described as the revenue available for 
the payment of taxes and for bondholders and stockholders. All the 
data for Table 3 have been taken from the income account Table 11. 
In this calculation there is added to the net revenue from rail opera¬ 
tions: 1. Net revenue from auxiliary operations (sleeping car and par¬ 
lor car service); 2. Income from unfunded securities and accounts such 



IN NORTH DAKOTA 


1.3 


as interest on cash held in banks and interest on advances to subsidiary 
companies; 3. Miscellaneous items such as rental for lease of any part 
of road, receipts for the hire of equipment, and receipts for the use of 
trackage by other railroads and the like. From this total of revenues is 
deducted interest payments other than on funded debt (for example, on 
current accounts due), payment for the use of trackage or of equipment 
of other railroads, payments for the lease of other railroads, and the 
like. The resulting figure in the case of the Great Northern and North¬ 
ern Pacific railroads is slightly greater than the net revenue from rail 
operations, while in the case of the Soo Line it is somewhat less, owing 
to the fact that very large rental payment is made for the use of the 
Wisconsin Central Railroad. As a matter of fact, the rental paid for the 
lease of the Wisconsin Central consists simply of the net earnings of that 
part of the system so that virtually the figure of total net revenue given 
in Table 3-C' for the Soo Line is the revenue from that part of the system 
which excludes the Wisconsin Central. Consequently, in apportioning 
to North Dakota its share of this net revenue the trackage or other items 
of the Wisconsin Central must be left out of account. 

It will be noted that whether the item of net revenue from rail opera¬ 
tions be taken as the basis for capitalization or the item of total net 
revenue as above described, the tax payments have in neither case 
been deducted. In other words, the earnings or income must serve as 
the fund from which to pay taxes as well as to pay interest on bonds 
and dividends on stock. This is unquestionably the proper method of 
handling the earnings for the purpose of valuation as a basis for taxa¬ 
tion. If the value of the property were to be calculated on the basis 
of earning capacity after taxes had been paid, the value would vary 
from time to time and from place to place according to the weight of 
taxation. If, for any reason the rate of taxation should become extreme¬ 
ly high, there might be little or nothing left for stock and bond holders, 
so that the value which they attributed to their property would be very 
small, and yet the true value of the property would really be precisely 
the same as if there were no taxation whatever. In other words, the 
true value of property is entirely independent of the manner in which 
the earnings of that property are divided between the government and 
the owners. 

For the sake of completeness, both of the above mentioned methods 
of calculating earnings or income have been used in this report as a 
basis for calculating the commercial value of the railroads of North 
Dakota, but on account of the simplicity of the figure of net revenue from 
rail operations and the possible questions which might be raised as to 
the propriety of including certain other items and as to the propriety 
of some of the deductions, it is suggested that the capitalization of the 
net revenue from rail operations is the more satisfactory figure. 

2. As regards the rate of percent at which the earning capacity 
should be capitalized for the purpose of determining the commercial 
value, it seems to be rather generally agreed among taxing authorities as 
well as among business men and railroad men that 6 per cent is a fair 



14 


ASSESSMENTS OF RAILROADS 


rate. It appears that, as a matter of fact, the present tax upon these 
North Dakota railroads amounts to about one-sixth of the net earnings 
from rail operations. (See income account, Table 11). Consequently, 
the rate of 6 per cent may be taken as representing about one per cent 
for tax payments and five per cent for the investor. There is no doubt 
that a safe security which pays five per cent net to the investor on its par 
value can be sold at par under normal conditions. 

In an address before the International Tax Association in 1910, (Fourth 
International Conference on State and Local Taxation, page 247), Mr. T. 
H. Polleys, tax commissioner of the C., St. P., M. & O. Railway, speaks 
with approval of the practice of capitalizing net earnings at six per cent 
for the purpose of determining the taxable value of railroads. He says, 
“The capitalization of the average net earnings for a period of years (gen¬ 
erally at the rate of six per cent) has been employed in many instances 
as an aid in the determination of system values.” 

A fuller extract of Mr. Polley’s statement is as follows: 

“(1). The railway system is the proper unit for the valuation of rail¬ 
way operating property. It is first necessary to determine the value of 
a railway as an entirety before it is possible to logically assign a value 
to that portion of its lines lying within a given state. Various sources 
of information are available for the determination of system railroad 
valuations. The stock and bond plan continues to be used to a greater 
or less extent in many states. When extended over a reasonable period 
of time, and when proper allowance is made for the fact that stock and 
bond quotations represent all the corporate assets of a railroad company, 
and not merely the operating property, which alone is taxable against it 
under an ad valorem law, there seems to be no good reason for rejecting 
from consideration the net value of operating property indicated by such 
quotations. Capitalization of average net earnings for a period of years 
(usually at the rate of 6 per cent) has been employed in many instances 
as an aid in the determination of system values. It should be kept in 
mind that the railroad net earnings reported to the Interstate Commerce 
Commission under the accounting rules in force since July 1, 1907, are 
entitled to far greater consideration, as an indication of value, than are 
the net earnings reported prior to that time. The appraisals of physical 
railroad property on the basis of cost of reproduction furnish a body 
of information, now rapidly increasing, relative to the value of railroads, 
viewed from still another standpoint. A composite system value reflect¬ 
ing simultaneously stock and bond quotations, capitalization of net earn 
ings, and cost of reproduction new would doubtless be more reliable than 
a value based solely upon one of these lines of information. In comput¬ 
ing railroad values, it is always convenient and desirable, for comparative 
purposes, to reduce them to an average value per mile.” 

It would be useles to go into an elaborate discussion of the proper rate 
of capitalization. Studies have frequently been made on the average rate 
of return on invesments of differnt classes. By comparing the rate of 
interest on bonds with the market prices for bonds, and the rate of divi- 



IN NORTH DAKOTA 


15 


dends on stocks with the market prices of stocks, in the latter case taking 
account also of the earnings not paid out as dividends, but which enhance 
value of stockholders’ interests, and in other ways, figures of average 
net return are reached. However, the average net return on an invest¬ 
ment differs materially under different conditions and there can be no 
single standard. Naturally the return is lower for absolutely safe bonds, 
such as government bonds, or prior lien bonds of the best railroads, than 
for less safe securities. Changes in the purchasing power of money as 
affected by tlje supply of gold and other causes bring about variations 
from time to time in the prices investors consider justified for securities, 
having a given rate of return on par. Changes in the general business 
prosperity and in the degree of confidence of investors, changes in the 
direction and amount of demand for available capital, and many other 
factors affect the prices of securities, or, in other words, affect the average 
rate of return on the amount actually paid for securities. Just now the 
great European war has disturbed financial conditions and has made 
prices of securities lower than usual. 

State taxing authorities can not every year undertake an elaborate in¬ 
vestigation of market conditions with a view to readjusting the rate at 
which they will capitalize net earnings in calculating values for purposes 
of taxation. The assessment of property in general is, now and probably 
always will be a somewhat rough matter. Ideal justice is not and can¬ 
not be secured. It is better, if capitalized net earnings are to be taken 
as a basis for the valuation of railroad or any other property, to use a cus¬ 
tomary and more or less unchanging rate for capitalization. Should there 
occur what appeared to be a fairly permanent change either upward or 
downward in the average rate of return on typical investments, the state 
government might be justified in adopting a new rate for capitalizing 
earnings. 

That the rate of six per cent representing substantially five per cent 
return for the investor is a fair basis, if there were need of special argu¬ 
ments in defense of the rate of six per cent as a basis for capitalization 
in the case of these railroads, might be substantiated by calling attention 
to the fact that each of the three leading roads, the Great Northern, 
Northern Pacific and Soo Line, has large amounts of bonds outstanding 
which bear less than five per cent interest. In fact, the average rate of 
all the bonds of these railroads is but little over four per cent. Without 
going into an elaborate investigation, it is impossible tc say at just what 
prices these bonds were originally sold or what prices they now command, 
but it is safe to say that the four per cent bonds of railroads as prosper¬ 
ous as these have in general been worth approximately par. 

Of course, the stocks of these roads sell at prices which net the in¬ 
vestor somewhat more than four per cent, although some years ago before 
the agitation with regard to the possible effects of government regulation 
upon earnings, and before the present war, the prices of their securities 
ran up so high, that the dividends amounted to little over four per cent 
of the market price. In view of the fact that a large part of the capital 
of these railroads is represented by bonds, it would obviously not be fair 



16 


ASSESSMENTS OF RAILROADS 


to take as a rate for capitalization a figure based on the relation of the 
market price of stocks only to the dividends or profits of the stock holder. 

Table 7 which summarizes the different methods of valuation shows 
the capitalization of net revenue from rail operations at six per cent for 
each of these three railroads and also capitalization at six per cent of 
total net revenue calculated in manner above described. It will be noted 
that taking the average for the three years 1912-14, the capitalization of 
the net revenue from rail operations gives for the Great Northern, as a 
whole, a value of $501,656 100, for the Northern Pacific, $446,339,000, and 
for the Soo Line including the Wisconsin Central, $184,097,183. The 
capitalization of the total net revenue available for taxes and for stock 
holders and bond holders gives for the Great Northern a value of $513,- 
830,050, for the Northern Pacific $493,679,550, and for the Soo Line, ex¬ 
clusive of the Wisconsin Central, $130 610,000. 

Market Value of Securities as a Basis for Valuation. 

There are two objections to using the market value of securities as a 
basis for the determination of the commercial value of the railroads of 
North Dakota. The first objection lies in the difficulty of determining 
what part of the total value of the securities is attributable to non-railway 
property. The second difficulty lies in the disturbed financial conditions 
of recent years which have tended to make the market prices of railroad 
stocks less than under normal conditions their earning capacity would 
justify. 

It is easy enough to ascertain the market prices for a series of years 
of stocks of a North Dakota railroad. In view of the large number of 
separate bond issues which each road has, bearing different rates of in¬ 
terest, and in view of the incompleteness of bond quotations, it is almost 
impossible to arrive at the precise market value of the bonds of these 
roads, but to place the average market value at par would not be far 
from correct. It is evident, however, that when the market price of 
securities is multiplied into the number of shares and bonds we obtain a 
total which represents more than the market valuation of the railroad 
operating property. As already pointed out, these railroads own much 
other property especially the stocks and bonds of other railroads. It is 
impossible to determine with any approach to accuracy what part of the 
total market value of the securities is represented by such non-railway 
property. One cannot know how buyers of the securities of the Great 
Northern Railroad, for example, estimate the value of its holdings in the 
Spokane, Portland & Seattle Railroad, which amounts to many millions of 
dollars. One cannot establish what would be the amount at par or the 
market value of the securities of the Great Northern if it had no such out¬ 
side investments. 

The only procedure available for excluding outside investments from 
the commercial valuation based upon the market prices of securities is 
to deduct from the total the book values of these outside investments as 
carried in the balance sheets of the railroads. For example, one can 
deduct in the case of the Great Northern the book value assigned to the 



IN NORTH DAKOTA 


17 


stocks and bonds of the Spokane, Portland & Seattle. There is no way of 
knowing, however, whether this book value represents either the actual 
investment of the Great Northern, or the market value of those securities, 
or the value which the investing public in buying the securities of the 
Great Northern assigns to these holdings. It is certain that in the case 
of both the Great Northern and the Northern Pacific the book value as¬ 
signed to the securities held in other corporations is materially greater 
than the capitalization at six per cent, or any other reasonable rate, of the 
present earning capacity of these securities. Large blocks of stocks held 
by them have at present no dividends. This is true of the stock of the 
Spokane, Portland & Seattle. It is undoubtedly safe to assume that the 
book value of the outside investments of all three of these railroads, and 
particularly of the Great Northern and Northern Pacific, materially exceed 
their commercial value at the present time, and that deducting this book 
value from the market value of the securities of these roads leaves an 
amount as representing the railway property itself, materially less than 
its true market value as judged by the investors. However, in the ab¬ 
sence of any other method of procedure deductions have been made in 
this manner. 

Tables 4 and 5 contain the material and show the results of a valua¬ 
tion of the three leading railroads on the basis of the market values of 
securities. Table 4 shows the market price of stocks of each railroad by 
months for the fiscal years 1912, 1913, and 1914, together with averages. 
Table 5 shows the par amount of the stocks and bonds of each railroad, 
the market value on the basis of the market prices of stocks and on the 
assumption that the bonds are worth par, and the various items or deduc¬ 
tions which have been made as representing outside investments. The 
items upon which Table 5 is based will be found in the general balance 
sheets of railroads constituting Table 12. 

It will be seen that this method of valuation gives for the Great 
Northern a net commercial value, based on the averages of 1912-14, of 
$367,517,805; for the Northern Pacific, $408,929,106; and for the Soo Line, 
not including the Wisconsin Central. $115,486,516. 

It is noteworthy that the market value of the securities of these rail¬ 
roads as given above is materially less than the capitalization of their net 
earnings from rail operations at six per cent. This difference is partly 
due doubtless to the fact already pointed out that an excessive amount 
has probably been deducted from the value of securities as representing 
the outside investment of these railroads. However, even if these deduc¬ 
tions had been materially smaller there still would have been considerable 
difference between the valuation based on market prices and the valua¬ 
tion based on capitalization of net earnings. 

The explanation appears to be found in the fact that investors in the 
last few years have not attributed to railroad stocks as high a value as 
might normally be expected from the earning capacity of railroads. To 
some extent prices of all securities have been depressed in recent years, 
including even bonds of national, state, and local governments. 
Even more, relatively, have the prices of railroad stocks declined. Part 



18 


ASSESSMENTS OF RAILROADS 


of this decline has, in the case of some of the railroads, been justified by 
actual decline in net earnings due to increased operating expenses. Part 
of it, however, has been due merely to timidity on the part of investors. 
They have feared that the control of rates by the Interstate Commerce 
Commission and by the state authorities might in the future result in a 
material decline in earning capacity. Consequently, they have not been 
disposed to pay for railroad stock prices which the current earnings and 
dividends would justify. 

The statistics published by the Interstate Commerce Commission show 
that the railroads of most parts of the country have fared relatively worse 
during recent years than those of the Northwest. Most of the railroads 
have shown less increase in volume of traffic and greater increase in 
operating expenses than have the Great Northern, Northern Pacific, and 
Soo Line. As shown by Table 13, the net earnings per mile of line of these 
leading railroads of North Dakota have kept up exceedingly well, and in 
the case of the Great Northern and Soo Line, they were materially higher 
in 1913. than in 1909, 1910, or 1912, the figures for 1911 not being available, 
and even the figures of 1914 are higher than for 1909. In the case of the 
Northern Pacific there has been some decline in net earnings per mile 
of line during more recent years but not as much as for the railroads of 
the United States, as a whole. 

Investors, however, are greatly influenced by general sentiment and 
underlying feelings. A justified depreciation in the price of stocks of one 
railroad will drag down somewhat the price of stocks of another where no 
such inherent conditions exist. There is little reason to doubt that the 
market prices of the stocks of the Great Northern and Northern Pacific 
and, probably, also of the Soo Line have been relatively lower in the last 
two or three years than the prices of the stocks of many of the eastern 
railroads when the earning capacity is given due weight. 

For these reasons it is believed that the capitalization at six per cent 
of the net earnings of these northwestern railroads more nearly equals 
their true normal value than the current market prices of their securities. 
However, in case it should be deemed by the Tax Commission more satis¬ 
factory to take an average of these two valuations, such an average has 
been computed in Table 8. 



IN NORTH DAKOTA 


19 


THE CLAIMS OF RAILROADS AS TO THE COST OF REPRODUCTION 


As already stated, there is no satisfactory information as to the 
original cost of these railroads and as to the cost of reproducing them, 
and even if such information existed, it would not be a true guide to the 
taxable value of railroad property, at least in case it proved to be less 
than commercial value. However, it is perhaps worth while to present 
such information as is available regarding the cost of these properties and 
the cost of reproducing them. The balance sheets of the several railroads 
of course purport to show a value for the various elements of their prop¬ 
erty. This is ordinarily known as the book value and presumably repre¬ 
sents not less than the actual amount of money invested and may repre¬ 
sent more. 

The assets used in connection with railway operations consist chiefly, 
of course, of the road itself, and its equipment, but besides, there are 
current assets such as cash, accounts receivable, and the like. These 
current assets are just as truly a part of the value of the property as the 
fixed plant.' No regard of course should be given for purposes of this 
report to the value of outside investments. Table 6 shows for each rail¬ 
road the various items taken from the balance sheets as representing 
the property used in railroad operation. A comparison with the balance 
sheets themselves (Table 12) will readily show which items have been 
omitted as not connected with railway operation. It will be seen that the 
book value in the case of the Great Northern for the year 1914 was $423,- 
174,930; for the Northern Pacific, $502,141,125, and for the Soo Line, 
$124,156,856. In comparing these figures with the commercial valuations 
above presented it should be borne in mind that the commercial valuations 
are based on the averages for the three years, 1912-14. It seems necessary 
to take such averages because of the variations from time to time in the 
earnings of the roads and in the market prices of their securities. On the 
other hand, the actual investment of the railroad companies is, of course, 
constantly increasing with extensions and improvements, and if it were 
possible or desirable to use actual investment as the basis for taxation, 
one should, of course, take the investment at the latest possible date. If 
these figures were to be accepted as trustworthy records of actual invest¬ 
ment of railroads, they would show that their net earnings represent not 
very much more than the normal rate of return on safe investments; in 
other words, these valuations are not greatly below the capitalized net 
earnings as shown in Table 7. 

While there are, doubtless, many who believe that the book value of 
the property, particularly the road and equipment, of these railroads 
represents more than actual investment in them, it is worth noting that 




20 


ASSESSMENTS OF RAILROADS 


the railroad companies themselves contend vigorously that to reproduce 
their properties at the present time would cost much more than these 
amounts. This contention, to be sure, is put forward in connection with 
freight and passenger rate cases and not in connection with assessments 
for taxation. As long ago as 1908, when the State of Minnesota was under¬ 
taking to reduce the railroad rates, engineers and experts representing 
the Great Northern and Northern Pacific Railroads presented estimates 
of the cost of reproducing their properties, as a whole, which greatly 
exceeded §ven the present book values, which are in turn materially 
higher than the book values of 1908. The following quotation taken from 
the report of Charles E. Otis, special Master in Equity in the case of 
Shepherd vs. Northern Pacific Railway, (other cases also being involved), 
is interesting, if not, perhaps, very informing. It will be seen from the quo¬ 
tation that the railroads claimed a value excluding the outside investments 
of $486,738! 161 in the case of the Northern Pacific, and of $518,206,215 in 
the case of the Great Northern. The quotation also shows the estimate 
of the Master in Chancery, himself, wherein he reduces these amounts 
claimed by the railroads somewhat. It may be noted that the Supreme 
Court of the United States held that even in the values calculated by the 
Master, there was an excess, 'the amount of such excess, however, not 
being estimated by the Court. 



IN NORTH DAKOTA 


21 


EXTRACT FROM REPORT OF CHARLES E. OTIS, MASTER IN EQUITY 


XIII—Valuations of Entire System 


“Complainants have offered considerable testimony for the purpose of 
establishing value of the physical properties of the whole system, both in 
the Northern Pacific and Great Northern cases, and they ask a finding of 
such valuation. 

“The State has confined its testimony as to value of such physical prop¬ 
erties only as are in Minnesota. The Master does not consider a finding 
in the matter at all necessary in determining the controversies submitted 
to him, but as such finding is desired by complainants he concludes to 

make it. 

“In the Northern Pacific case there was testimony to the effect that 
the cost of reproduction of the physical properties of the entire system 
would amount to the sum of $526,779,016. This includes $28,913,981 for 
the Spokane, Portland & Seattle road, one-half of which is owned by the 
Northern Pacific Company and one-half by the Great Northern Company, 
the amount so taken being one-half of such cost. This road was, at the 
time evidence was submitted, under construction, did no commercial busi¬ 
ness, earned no revenue, and until completion could form no part of the 
operating system. When completed its cost of reproduction will be en¬ 
hanced by interest during construction and until then it forms no part 
of rate making valuation. It is not included in the track mileage of the 
system hereinbefore found to amount to 7,695.80 miles. 

“There is also included in complainants’ estimate the further sum of 
$4,116,874 for the Minnesota & International and the Big Forks and Inter¬ 
national roadst, which, for reasons before given, must be deducted. 

“There has also been so included the further sum of $7,000,000 for lines 
in Manitoba which are under leases and form no part of the company’s 
operating system. 

“Eliminating these items leaves a balance of $486,738,161. 

“Assuming as we may that there should be at least the same per cent 
reduction for the whole system as it has been found necessary to make in 
Minnesota (which after deducting as here for the Minnesota & Interna¬ 
tional and the Big Forks & International Falls lines were substantially 
seven per cent), the valuation amounts to $452,666,489, and upon the testi¬ 
mony produced the cost of reproduction is found to amount to this sum. 

“In the Great Northern case, there was testimony to the effect that 
cost of reproduction of the entire system would amount to $549,253,317. 





22 


ASSESSMENTS OF RAILROADS 


Deducting for its interest in the Spokane, Portland & Seattle line $21,- 
827' 521 and for lines under construction $8,219,581, leaves a balance of 
$518,206,215. 

“Assuming, as in the Northern Pacific case, that there should be the 
same per cent of reduction for the whole system as it has been necessary 
to make in Minnesota, and which is substantially 12 per cent, the valua¬ 
tion amounts to the sum of $457,121,469, and upon the testimony before 
the Master the cost of reproduction of the whole system is found to 
amount to this sum.” 




IN NORTH DAKOTA 


23 


METHODS OF DETERMINING NORTH DAKOTA’S SHARE OF 
SYSTEM VALUATIONS 


Variety of possible methods. 

Having determined the commercial valuation of the railroad systems, 
as a whole, it remains to fix upon a just and satisfactory method of assign¬ 
ing to North Dakota its share of the total valuation. There are many 
possible ways of making such apportionment. One may determine what 
proportion the mileage of line in North Dakota forms to the total mileage, 
disregarding the fact that some parts of the line are double tracked and 
others not. and disregarding the sidings, yard tracks, and the like. Again, 
the apportionment may be made on the basis of trackage, giving to a mile 
of switch track as much weight as to a mile of main line track. The ad¬ 
vantage of either of these methods is that the figures are perfectly definite 
and involve no assumptions or estimates. 

Other methods of apportionment have to do with operations of the 
road. Thus we might apportion according to car mileage of freight and 
passenger cars combined, or according to some combination of freight ton 
mileage with passenger mileage. The use of these methods, however, 
would be practically without precedent. 

Finally, one may apportion valuation among states according to gross 
earnings or according to net earnings. 

Of these possible methods three have been selected and applied in this 
report, namely: apportionment according to line mileage, according to 
gross earnings, and according to net earnings. Averages are also present¬ 
ed using these three methods combined (Table 7) and other averages 
using a combination of line mileage and gross earnings only (Table 8). 

Apportionment according to mileage of line. 

In the case of these northwestern railroads, none of which have a great 
deal of double track, and whose mileage of sidings and yard trackage is 
relatively less than in the case of some of the eastern railroads, an ex¬ 
amination of the report shows that there would be no great difference be¬ 
tween North Dakota’s share of valuation if based on line mileage and if 
based on all-track mileage. Line mileage is much more commonly used 
by the taxing authorities of other states than all-track mileage and it has 
been deemed preferable to make computations only on basis of line mile¬ 
age. 

It is so common throughout the country for state taxing authorities 
in valuing railroads to determine shares of system valuations for their 
particular states by the proportion which line mileage within the state 
bears to total line mileage that at first thought there would seem no reason 
for not adopting this method in North Dakota. The system has the sup- 




24 


ASSESSMENTS OF RAILROADS 


port not only of the practice of taxing authorities but of state and federal 
courts including the Supreme Court of the United States. In some states 
the statutes expressly provide for the use of this method. 

Where a railroad system runs through states of more or less equally 
distributed population and where all parts of its systems are more or 
less equally utilized, apportionment according to line mileage is not 
merely convenient but essentially Just. It would give very much the 
same results as apportionment according either to gross earnings or net 
earnings. But in the case of these northwestern railroads there is a very 
great difference between the results of apportionment according to line 
mileage (or all-track mileage either) and apportionment according either 
to gross or to net earnings. The amount of traffic per mile of line in 
North Dakota is materially less than in some other states through which 
these same railroads run. and materially less than the averages for the 
systems, as a whole. There are in this state many miles of branch lines 
tapping the grain fields whose traffic, except immediately after harvest, 
is naturally light. North Dakota contrasts with Minnesota in having a 
much sparser population. On the other hand, it contrasts with Montana 
in that a large portion of the total trackage of the Great Northern and 
Northern Pacific in Montana consists of through lines reaching across the 
state and carrying traffic from the Pacific Coast to the East, there being 
far less mileage of local branch lines than in North Dakota. In view of 
these considerations, it would be scarcely just for the Tax Commission 
of North Dakota to insist upon an apportionment of the valuation of 
these railroads in that state according to line mileage alone. 

Table 7 shows the proportion which the line mileage of each of these 
railroads in North Dakota forms of its mileage and presents calculations 
of North Dakota’s share of the several methods of valuation on the line 
mileage basis of apportionment. 

It should be stated that there are various ways of calculating even the 
simple item of line mileage. Table 10, dealing with the mileage statistics 
shows the various classes of line owned or operated by each railroad. 
Part of the line owned by a railroad may not be operated by it at all, 
but leased to some other road. In the case of none of these railroads is 
all of the line operated owned by the operating company. Some is operat¬ 
ed under lease from other roads or under contract, some is operated jointly 
with other roads under what are called trackage rights. 

On the whole, in view of the fact, that the commercial value of a rail¬ 
road is based not so much on what it owns as on the income derived from 
what it operates, it seems most just to use the total mileage operated for 
the entire system and the total mileage operated in North Dakota as a 
basis for the apportionment of the valuation. 

The annual reports of these railroad companies show not merely the 
mileage in operation at the end of the year covered by the report, but also 
the average mileage operated during the year which is usually somewhat 
less than the mileage at the end of the year. Inasmuch as most of the com¬ 
putations of averages per mile of line such as the average gross earnings 



IN NORTH DAKOTA 


25 


per mile of line or the average net earnings per mile of line are based 
upon the average mileage operated during the year, it has been deemed 
preferable to use the average mileage operated during the year as a 
basis for the figures in these computations. It may be noted that in the 
case of the Northern Pacific there is quite a difference between the figure 
given for the average mileage operated during the year and that given 
for the mileage operated at the end of the year, this difference being due 
to the fact that in the former spur tracks to industries are not counted 
as line mileage at all while in the latter they are counted. 

Apportionment according to gross earnings. 

The method of apportioning total value of a railroad system among 
the states according to gross earnings is the only method which is at all 
commonly used except that according to line or track mileage and it is 
used much less commonly than the mileage method. 

Railroad accounting officers are in the habit of distinguishing their 
gross earnings by states and have adopted standard rules of procedure 
for doing so. Since a very large proportion of the entire business of most 
railroads is interstate, it becomes necessary to make a division between 
the several states as regards earnings from such interstate business. It 
would not be at all satisfactory merely to determine how much money 
is actually collected within the confines of each state. It is customary 
in the case of an interstate shipment to distribute the total revenue ac¬ 
cording to the number of miles hauled within each state. For example, 
if a shipment of wheat moves from North Dakota to Minneapolis passing 
100 miles through North Dakota and 200 miles through Minnesota, one 
third of the receipts would be credited to North Dakota. It will be ob¬ 
served that this method of dividing gross earnings involves a decidedly 
important assumption, namely the assumption that earnings are properly 
distributed according to distance hauled. One might raise the question 
whether a haul of a given distance under certain conditions in one state 
ought not to be counted as earning relatively more per mile than a haul 
of the same distance in another state. However, there is no other way 
of apportioning gross earnings in actual use and the only figures available 
to show gross earnings of these railroads in North Dakota are those in 
which this method of apportionment has been used by the railroads. 

Table 7 shows the gross earnings of each of the three leading rail¬ 
roads of North Dakota for the system, as a whole, and for the state, to¬ 
gether with the proportion for the state. It also shows the amount which 
the value of these railroads, according to various methods of valuation, 
for the state of North Dakota would be on the basis of apportionment 
according to gross earnings. It will be observed that North Dakota's 
share of the valuation in the case of each of the railroads is very much 
lower on the basis of gross earnings than on the basis of line mileage 
and also much lower than the proportion on the basis of net revenue here¬ 
after discussed. For example, in the case of the Great Northern on the 
basis of the average for the three years 1912-14 the line mileage in North 
Dakota constituted 22.65% of the total line mileage while the gross rail 



26 


ASSESSMENTS OF RAILROADS 


operating revenues in North Dakota constituted only 17.47% of the total. 
The explanation, of course, is obvious. Traffic in North Dakota is lighter 
per mile of line than in some of the other states through which these rail¬ 
roads run. 

It is a question, however, whether one would be justified in using 
gross earnings as a basis for apportionment without modification. It may 
readily be that in the case of some of the branch lines in North Dakota, 
especially newer lines, the earning capacity at present is less than a fair 
return on the actual investment. These lines have been constructed in 
some cases, with a view to the more or less distant future and to the 
development of a new country. If there could be such a thing as separate 
commercial valuation of every individual branch, it might be found that 
a good many of the branches have a commercial value less than the orig¬ 
inal cost or the cost of reproducing them. In such a case the state would 
doubtless be justified in assessing these lines on the basis of cost rather 
than of commercial value. It follows that in apportioning the total com¬ 
mercial valuation between North Dakota and other states, some weight 
might properly be given to the mileage basis where that gives a larger 
share to North Dakota than the gross earnings basis. On the whole the 
average of the apportionment according to gross earnings and apportion¬ 
ment according to line mileage would seem to be about as nearly just a 
basis for valuing these roads in North Dakota as any that could be devis¬ 
ed. In this connection it may be noted that Mr. T. A. Polleys of the 
Omaha road, whose paper on railroad taxation has already been quoted, 
says in the same paper, page 250, “Personally I am convinced that a 
distribution on a composite basis which gives equal effect both to all track 
mileage and to gross earnings, meets the widely varying conditions of the 
problem much more satisfactorily than does a distribution on either basis 
singly.” Since, as already stated, there is in the case of these railroads 
no very great difference between distribution according to all track mile¬ 
age and distribution according to the line mileage, the above suggested 
average conforms very closely to what Mr. Polleys, a recognized authority, 
from the railroad point of view, considers a fair method of apportionment. 

Apportionment according to net earnings. 

The most just method of apportioning the commercial value of railroad 
property among the states would be according to the net earnings within 
each state. It would be particularly appropriate, where the commercial 
value of the entire system is calculated by capitalizing the net earnings, 
to use the net earnings by states as a basis for distribution. In fact, this 
would substantially amount to capitalizing directly the net earnings 
within a given state in order to determine the commercial value in that 
state. 

The objection to this system lies in the fact that there are no generally 
recognized principles for ascertaining the net earnings of a railroad within 
any given state, that is, in the case of railroads which extend into two or 
more states. Net earnings, of course, represent the difference between 
gross earnings and operating expenses. Aside from the assumption al- 



IN NORTH DAKOTA 


:7 


ready discussed by which gross earnings are apportioned among the states 
there must be many other assumptions regarding apportionment of op¬ 
erating expenses among the states before the net earnings by states can 
be calculated. Some of the expenses of the interstate railroad are, of 
course, clearly localized, but many others are not. Those expenses which 
are general to two or more states or to the entire system have to be dis¬ 
tributed according to some more or less arbitrary method. 

Some of the railroads of the country do not undertake to distribute 
their operating expenses by states or to arrive at the net earnings by 
states. In other cases they do so, but protest that the methods involved 
in apportioning expenses are unsatisfactory. These particular railroads 
which operate in North Dakota do undertake to segregate expenses within 
the state and to calculate the net earnings within the state. Reports filed 
annually by them with the North Dakota Railroad and Warehouse Com¬ 
mission contain these figures. Doubtless the railroads have used the best 
judgment of their expert accountants in making the distribution and the 
figures presumably conform as nearly to the truth as could in any way 
be expected. Probably no serious injustice would be done to any of these 
railroads if their figures for net earnings within the state were taken as 
a basis for determining North Dakota’s share of their total system valua¬ 
tion. However, if any of these railroad companies should object to such 
method of apportionment they could bring forward plausible arguments 
to show at least the possibility of disparity between the true net earnings 
in the state and those calculated according to methods of their own ac¬ 
countants. In Wisconsin and some other states where this same problem 
has confronted the taxing officials, the representatives of the railroads 
have objected to any attempt to calculate net earnings within the state 
for purposes of apportioning assessments. 

If the taxing authorities of North Dakota are convinced that the figures 
for net earnings in North Dakota, as reported by these railroads, are as 
nearly trustworthy as human ingenuity can make them, and are prepared 
to reply to any criticism they may meet of their validity, the use of these 
figures for determining North Dakota’s share of the valuation of these 
roads would be eminently satisfactory. 

Table 13 shows for the Great Northern, Northern Pacific and Soo Line, 
respectively, the total net earnings, net earnings within the state of North 
Dakota as reported by the railroads themselves, and North Dakota’s per¬ 
centage of the total. It also shows North Dakota’s share of the valuation of 
the roads according to the various methods on the basis of these per¬ 
centages. 

It will be observed that the percentage which the net earnings reported 
for North Dakota forms of the total net earnings is about equal to the 
mean, in the case of each railroad, between the percentage of line mile¬ 
age in North Dakota, and the percentage of gross earnings in North Da¬ 
kota. Consequently, if the apportionment to North Dakota be based upon 
the mean between the mileage percentage and the gross earnings per¬ 
centage, the result would be approximately the same as if the apportion¬ 
ment had been according to the reported net earnings. 



28 


ASSESSMENTS OF RAILROADS 


Whatever doubt there may be as regards the details of the methods of ap¬ 
portioning operating expenses and consequently of arriving at net earnings 
by states, it is probably a fact that North Dakota’s share of the net earn¬ 
ings of these railroads is really somewhat larger than its share of their 
gross earnings. In other words, it is probably true that the operating 
expenses are relatively lower in North Dakota than in most of the other 
states through which these railroads operate. According to the method of 
apportioning expenses by the railroads, it appears that in the case of the 
Great Northern, for the years 1912-14 taken together, the operating ex¬ 
penses form 59% of the operating revenues for the system, as a whole, 
while for North Dakota they form only 52.3% (Table 13). A similar differ¬ 
ence appears in the case of the Northern Pacific and a smaller difference in 
the case of the Soo Line. The level territory of North Dakota, the compara¬ 
tively low price of fuel, and the generally favorable operating conditions,, 
may readily bring it about that the operating expenses should form a 
smaller proportion of earnings in that state than for the systems as a 
whole. Just so far as this is the case, just so far, in other words, as North 
Dakota’s share of net earnings exceeds its share of gross earnings, the 
state is justified in claiming a greater share of the total valuation than 
would result from the use of gross earnings as a basis of apportionment. 
It may be observed further that this problem of the net earnings within 
the state is directly dependent upon the problem of gross earnings within 
the state which has already been discussed. 



IN NORTH DAKOTA 


29 


CONCLUSION 


All the data bearing upon the commercial valuation of the railroads of 
North Dakota are summarized in tables 7, 8 and 9. Table 7 shows for each 
railroad the valuation according to each of the three methods of valuing 
the entire system and the distribution of each total to North Dakota ac¬ 
cording to each of the three methods of distribution. There is also shown 
for each of the three valuations of the entire system the share which 
would accrue to North Dakota if the distribution were made on the basis 
of an average of North Dakota’s share of mileage, gross operating earn¬ 
ings, and net operating earnings. Similarly, there is shown an average 
valuation of the entire system which combines the three separate valua¬ 
tions, together with a distribution of this average according to each of the 
three methods of apportionment and according to a combination 
of the three methods. This last figure of all, in other words, is a 
general average of all the figures. It amounts in the case of the Great 
Northern to $92907,133; in the case of the Northern Pacific to $84,067,002, 
and in the case of the Soo Line to $44,892,564. 

If all the methods of valuation and of apportionment were of equal 
utility and fairness this general average of all combined might be taken 
as the truest index of the commercial value of these roads in North Da¬ 
kota. Reasons have been advanced, however, for preferring certain meth¬ 
ods of valuation and of apportionment to others. Table 8 selects from 
Table 7 those figures which are probably, on the whole, to be considered as 
most significant. 

It has been shown above that the capitalization of the net earnings from 
rail operations at 6% is, in all probability, a truer measure of the commer¬ 
cial value of these railroads as systems than any other. It has been shown 
further that a combination of line mileage with gross earnings furnishes 
a satisfactory basis for the apportionment of North Dakota’s share of the 
system value. Table 8 shows the share of the capitalization value ac¬ 
cruing to North Dakota on the basis of this double method of distribution. 
North Dakota’s share of the value of the Great Northern as thus cum- 
puted is found to be $100,632,214; of the Northern Pacific $84,960,620; and 
of the Soo Line $44 725,478. These are the figures which the writer of 
this report recommends as a basis for the assessment of the railroads of 
the state. 

For reasons already suggested, it is not considered that the market 
value of the stocks and bonds of these railroads, after deducting the book 
value of outside investments, represents their full normal commercial 
value. If any departure is made from the principle of assessing on the 
basis of capitalization of net earnings, it should go no further than to adopt 
the mean between the capitalization of net earnings and the market value 
of securities. Table 8 shows what would be the valuation for North Da¬ 
kota if the value of the entire system were taken as such a mean and if 
North Dakota’s share were computed by a combination of the mileage 
method and the gross earnings method. 



TABLE 1 


30 


ASSESSMENTS OF RAILROADS 


t- LO 1C 

o o »a 

O OO LA 


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IN NORTH DAKOTA 


31 


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◄ 






























TABLE 1 — Continued 

COMPARISON OF MAIN OPERATING RESULTS OF NORTHERN PACIFIC, GREAT NORTHERN, AND SOO LINE WITH 


32 


ASSESSMENTS OF RAILROADS 


o S 

o .S 


f- o 
<u -ri 


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£ £ £ 
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o o o 

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-(->+-> +-> 
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of value of certain stocks required by court to be disposed of. Deducting excess of dividends of these two roads for 1914 over 1913 
($86,000,000) would make average dividend on dividend paying stock 6.45 percent and on all stock 4.21 per cent. 
























COMPARISON OF MAIN OPERATING RESULTS FOR NORTHERN PACIFIC, GREAT NORTHERN, AND SOO LINE 
WITH THOSE OF THESE THREE AS A WHOLE AND OF THE WESTERN DISTRICT AS A WHOLE 


IN NORTH DAKOTA 


33 


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Material for calculation of operating results for western district exclusive of Northern Pacific, Great Northern, and Soo Line- 
(Col. 3 of table, derived from Col. 3 of this table.) 





























COMPARATIVE STATISTICS OF LEADING INDIVIDUAL RAILROADS OF THE WEST 

(Includes all lines west of Chicago having gross operating earnings exceeding $10,000,000.) 


ASSESSMENTS OF RAILROADS 


34 


Per cent 
net 

Corporate 

Income to 

Capital 

Stock 

7.93 

8.79 

8.02 

9.96 

10.92 

8.33 

11.17 

14.56 

7.47 

7.52 

9.61 

7.95 

6.99 

12.73 

18.12 

16.04 

Net 

Corporate 

Income 

$19,661,715 

21,559,738 

19,892,229 

20,903,924 

24,354,815 

19,880,502 

4,224,290 

5,507,041 

2,823,766 

11,467,331 

14,875,013 

12,306,142 

2,084,603 

2,278,933 

2,021,615 

| 14,106,754 

20,086,196 

17,774,286 

Total 
Capital 
Stock not 
held by 
Company 

$247,940,000 
247,946,000 
247,946,000 

209,981,500 

222,940,046 

238,673,693 

37,810,200 

37,810,200 

37,810,200 

152,512,224 

$154,854,486 

$154,854,486 

29,813,067 

110,839,100 

110,839,100 

110,839,100 

Av. Frt. 

Rate 
per ton 
per mile 
(cents) 

0.867 

0.839 

0.854 

0.769 

0.7651 

0.794 

1 

0.701 

0.705 

0,735 

0.907 

0.870 

0.867 

i 

0.868 

0.860 

0.883 

0.752 

0.729 

0.729 

Av. Frt. 
Revenue 
per Train 
mile 

$4.43 

4.54 

4.84 

4.62 

4.86 

5.26 

2.90j 

3.09 

3.14 

2.71 

3.03 

3.01 

2.16 

2.38 

2.71 

3.29 

3.53 

3.49 

Average 

Freight 

Train 

Load, 

Tons 

510.5 

541.6 

566.9 

601.1 

634.5 

662.6 

413.7 

438.7 

426.7 

298.9 
348.0 

347.6 

249.2 
276.0 

307.2 

437.7 

483.8 

478.6 

Frt. Tnge 
Carried 

1 mile 
per mile 
of road 

838,358] 
995,578| 
889,979 

845,317 

993,445 

890,809 

719,354 

844,144 

684,939 

654,882 

787,902 

771,930 

625,852 

723,019 

740,191 

845,900 

965,083 

942,339 

Ratio 
of Net to 
Gross 
Revenue 

% 

39.8 

38.5 

39.5 

43.1 

41.7 

38.3 

39.5 

40.5 

34.2 

28.5 

29.9 
20.0 

30.8 
30.1 
29.8! 

30.1 

33.4 
33.0 

Net 

Operating 
Earnings 
per Mile 

$4,192 

4,473 

4,280 

3,875 

4,272 

3,718 

2,751 

3,260 

2,431 

2,672 

3,108 

3,007 

2,676 

2,923 

3,066 

2,874 

3,461 

3,348 





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IN NORTH DAKOTA 


35 


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TABLE 2—Continued 


ASSESSMENTS OF RAILROADS 


36 


H 
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IN NORTH DAKOTA 


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TABLE 2—Continued 


38 


ASSESSMENTS OF RAILROADS 


I— 

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IN NORTH DAKOTA 


30 


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40 


ASSESSMENTS OF RAILROADS 


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NORTHERN PACIFIC—TOTAL NET REVENUE AS BASIS FOR VALUATION 


IN NORTH DAKOTA 



































MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE R Al LW AY—TOTAL NET REVENUE AS BASIS FOR VALUATION 


42 


ASSESSMENTS OF RAIRROADS 


T3 

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IN NORTH DAKOTA 


43 


TABLE 4 

PRICES OF STOCKS OF THE SEVERAL RAILROADS 
July 1911-June 1914 


• 

Northern Pacific 

Great Northern 

Soo Line 

Lowest 

Highest 

Lowest 

Highest 

(Bid Prices) 

Common Pr’f’d 

1911— 













July .. 

130 

12 

135 


133. 

.75 

133 


139. 

75 

155 


Aug. 

114 

5 

131 

.5 

120, 

.5 

134, 

.5 

130. 

.5 

145. 

5 

Sept. 

110 

75 

118 

.88 

119 


124 

.75 

126 


144 


Oct. 

113 

25 

118 


122 


127 


133. 

.75 

147 


Nov. 

117 


122 

.5 

124, 

.5 

129 

.75 

134 

.5 

147 


Dec. 

115 

75 

119 

.37 

125, 

.5 

129 

.12 

134, 

.5 

148. 

,37 

1912— 













Jan . 

115 

37 

119. 

.75 

126 


132. 

.5 

129. 

.5 

147 


Feb. 

115 

37 

117. 

.88 

127. 

12 

131. 

,12 

133. 

,37 

147 


Mar. 

117 

5 

123 

.63 

130 

.37 

134 

.5 

137 

.63 

148. 

.5 

Apr. 

120 


125 

.63 

130 

.25 

135 

.75 

140. 

.5 

150 


May . 

118 


121 

.63 

130 


133 

.63 

140 


152 


June . 

118 

5 

121 

.37 

132 

.5 

135 


143, 

.5 

150 


Average . 


120 

.05 



129 

.46 


135 

.29 

148. 

.45 

1912— 













July . 

118. 

.25 

124. 

.63 

133 


141 


150 


156 


Aug. 

125 


131 

.5 

138 


143 

.75 

150. 

.75 

150 


Sept. 

125 

.5 . 

130 

.5 

136 

.75 

142 

.5 

149, 

.25 

153. 

.37 

Oct. 

122. 

.63 

130. 

.37 

135. 

.25 

141. 

.88 

140 


150 


Nov. 

123 


128 


136 

.5 

141 

.25 

141 

.5 

148 


Dec. 

117 

.88 

125, 

.12 

129 


138 

.5 

137. 

.5 

146 


1913— 













Jan. 

117, 

.25 

122 

.63 

125, 

.75 

132 

.63 

140 


144 


Feb. 

113 

.63 

120 

.25 

124 


129, 

.63 

136. 

,5 

142 


Mar.,. 

114 


118 


124. 

.75 

129. 

.5 

134. 

5 

142 


Apr. 

113 

.5 

119, 

.12 

124. 

.5 

131. 

.25 

131. 

.75 

141 


May . 

113 

.25 

115 

.88 

125 


127 

.88 

128 


135 


June . 

101 

.75 

114 


115 

.5 

125 

.75 

122 


132 


Average . 


120 

.24 



132 

.23 


138, 

.48 

144. 

,95 

1913— 













July . 

105, 

.12 

110 

.88 

122 


126, 

.75 

125. 

.12 

140 


Aug. 

109 


114 


125 

.5 

129, 

.63 

134 


140 


Sept. 

110 

.25 

115 

.12 

125, 

.25 

129 

.25 

132, 

.5 

135 


Oct. 

105 

.12 

112 

.63 

120. 

.12 

127, 

.12 

128 


135 


Nov. 

103, 

.75 

108 


121. 

.12 

124, 

.5 

126 


131 


Dec.. 

105 

.75 

110 

.75 

123 


127, 

.75 

125 


135 


1914— 













Jan. 

109 


117, 

.5 

125, 

.25 

132, 

.5 

132. 

,75 

142. 

5 

Feb. 

111. 

.5 

118. 

.5 

126. 

37 

134. 

,75 

133. 

25 

143 


Mar. 

109 

.5 

116 

.75 

125. 

.75 

128, 

.88 

126 


139 


Apr. 

106. 

.5 

115. 

.12 

119 


127. 

63 

121. 

5 

130 


May . 

108 


112, 

.63 

121, 

.88 

125, 

.25 

- 125. 

.5 

135 


June . 

108 

.5 

111 

.88 

121 


125 


123 


130 


Average . 


110 

.66 



125 

.64 


127. 

.72 

136. 

29 

Average July 1911-June 













1914 . 


116 

.98 



129 

.11 


137. 

16 

143. 

23 



























































TABLE 5-A 

GREAT NORTHERN—VALUE OF SECURITIES BASED ON RAILROAD PROPERTY 


44 


ASSESSMENTS OF RAILROADS 


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$ Includes physical property, unpledged securities, and certain pledged securities. 



































NORTHERN PACIFIC—VALU E OF SECURITIES BASED ON RAILROAD PROPERTY 


IN NORTH DAKOTA 


45 


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* Presumably the average market value of N. P. bonds is less than par as average rate of interest is only 3.88 per cent and 
$54,601,500 bear only 3 per cent. # 

t Includes physical property, unpledged securities and certain pledged securities, 
t Collateral trust bonds issued for C. B. & Q. stock not included. 


























































TABLE 5-C 

MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAl LWAY—VALUE OF SECURITIES BASED ON RAILROAD 

PROPERTY 

(Excluding certificates issued in connection with Wisconsin Central Lines, and deducting investments not connected with 


46 


ASSESSMENTS OF RAILROADS 



Includes Wisconsin Central Common stock; most of other stocks are of companies whose lines are not included in operations of 
















































IN NORTH DAKOTA 


47 


TABLE 6-A 

GREAT NORTHERN—SUMMARY OF ASSETS USED IN OPERATION — 
PER BALANCE SHEET 



1912 

1913 

1914 

Road and Equipment . 

$318,990,321 

$341,344,257 

$351,530,158 

Securities of proprietary and affiliated 
companies (excludes bonds of G. N. 




pledged) . 

33,554,641 

34,675,149 

36,661,439 

Advances to prop, and affil. companies.. 

1,646,759 

449,704 

148,451 

Cash . 

12,829,135 

5,116,814 

5,507,710 

Other working assets, excluding securi¬ 
ties issued, held in treasury, and 




marketable securities . 

Accrued income not due. 

17,974,085 

406,667 

3,538,319 

19,977,635 

20,725,266 

491,400 

8,110,506 

Deferred debit items . 

3,541,066 

Total . 

$388,939,927 

$405,104,625 

$423,174,930 


Average 1912-14, $405,739,827 


TABLE 6-B 

NORTHERN PACI FIC—SU M M ARY OF ASSETS USED IN OPERATION 
—PER BALANCE SHEET 


1 

1912 

1913 

1914 

Road and Equipment . 

$404,406,787 

$418,958,386 

$464,046,149 

Securities of proprietary and affiliated 
companies excluding Spokane, Port¬ 


I 


land & Seattle . 

8,769,950 

5,458,756 

2,387,026 

Advances to proprietary companies. 

22,665,563 

22,642,067 

958,701 

Cash . 

5,566,568 

3,457,972 

6,595,904 

Other working assets excluding securities 
issued, in treasury, and marketable 




securities . 

16,442,041 

20,441,673 

20,225,539 

Accrued income not due. 

596,268 

160,. 185 

569,672 

Deferred debit items . 

6,445,359 

6,403”, 707 

7,358,134 

Total . 

* ! 

$464,892,536 

l 

$477,522,746 

$502,141,125 


Average 1912-14, $481,518,802 






































48 


ASSESSMENTS OF RAILROADS 


TABLE 6-C 

SOO LINE—SUMMARY OF ASSETS USED IN OPERATION—PER 
BALANCE SHEET 



1912 

1913 

1914 

Road and Equipment . 

$98,623,118 

$108,978,818 

$111,524,473 

Advances to proprietary and affiliated 

companies . 

5,547,598 

5,271,256 



Cash . 

3,357,524 

4,479,428 

Other working assets excluding securities 

issued, held in treasury and market¬ 
able securities . 

5,322,644 

123,507 

3,467,154 

$118,355,277 

5,784,025 

123,951 

3,389,992 

$121,634,310 

4,713,827 

128,782 

3,310,346 

$124,156,856 

Accrued income not. due . 

Deferred debit items . 

Total . 



Average 1912-14, $121,482,148 

For comparing valuation based on net earnings with this value it is neces¬ 
sary to exclude net earnings from Wisconsin Central, a leased line. 


















IN NORTH DAKOTA 


49 


H 

Z 

LU 

2 

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o 

H 

OC 

O 

CL 

CL 

< 

Q 

Z 

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o ^ 

h 

< 

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o 

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^ > 

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CO w 

Q 

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LU 

2 
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> 

DC 

< 


>5 


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M H 


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d ® 


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05 

£ O 

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1 2 

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m .2 
w m 

® >5 

w ,£ 

ft 

0) M 
S d 
9 C 


d £ 
O'Cm 

-t- 1 l~< © 

V, o 00 
° ® © 
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00 

S % © 

O 5 CO 
^ fl W 

2 3 


S c 
o 2 

£ I 


> 3 

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o w 
o 

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bo d 

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3 : 

d tc 


m © 
d a 

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ft -2 


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a s-t 
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0_. L 

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© 2 
2 ft 
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CO 

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Total. 7,610.5 Per cent in North Dakota. 17.47 

In North Dakota . 1,723.9 Net Rail Operating Revenues— 

Per cent in North Dakota . 22.65 Total. $30,099,366 

Gross Rail Operating Revenues— In North Dakota.. 6,121,280 

Total. $73,418,860 Per cent in North Dakota. 20.34 


































50 


ASSESSMENTS OF RAILROADS 




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TABLE 7-C 

MINNEAPOLIS, ST. PAUL & SAULT STE. M ARIE—SU M M ARY OF METHODS OF VALUATION AND APPORTIONMENT 

OF VALUATION (AVERAGE 1912-14) 


IN NORTH DAKOTA 


51 


~ H 


s § 

S a 


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52 


ASSESSMENTS OF RAILROADS 


C 

N. 

LU 

-J 

m 

< 

h 


fl < 

o 

o u. 

I o 


. • . .^^OCOMWOGIOI> 

N M • <r> CO • ^ 05 -GOLO • CO LO 

<M 05 O <M 05 O - - 05 - - ■H - • 05 

OJHCOOJH^^^HUJOONOOy'N 
- ~ * - ►++C000*K^(McO5H(MI(- 

CO t-H 03 i-i 05 tO O CO 00 N 


00 iO 


(M 


C- C-l 


<M 05 

00 00 
^ tH 
05 oq 


<D 


t- <M 
<M IO 
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05 <M 

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C$ 


0) 

3 

fi 

5 s 

cd 3 
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00 00 
C\j cq 


o o 
co oo 
05 ccq 


D- OO 
*£> ^ 
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5 cj 


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^P 


- o 


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p. X 
« d 
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£ w +J J-J r-H +J 

Sfioglo 

Pn £ 


18* 


- 0) 
in,® 
H w c 

3 


- 4) M 

3 Oh § 

o 


a3 a> 

IS 
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Q <D 

t, 6C -5 

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5 2 j*! 

d * 

c ^ Q 

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<u _ o 

o 2 o 
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« « - 
p ^ 3 

<u 

£ 


o 

7i 

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5 £ 

a) O o 

be P C 

C — 
Si *> 


ftl " 

23£ 

0) 

£ 


|| Wisconsin Central net earnings taken as amount paid by Soo Line as rental for Wisconsin Central. 









































IN NORTH DAKOTA 


53 


TABLE 8 

COMBINATION OF CERTAIN METHODS OF COMMERCIAL VALUA¬ 
TION OF ENTIRE SYSTEMS AND NORTH DAKOTA’S SHARE 
THEREOF ON BASIS OF COMBINATION OF CERTAIN 
METHODS OF DISTRIBUTION (AVERAGES 
1912-14) 

(The valuations designated as C 1 are considered most satisfactory.) 



Great 

Northern 

Northern 

Pacific 

Soo Line 
(Exc. 

Wis. Cen.) 

Entire System— 

1. Capitalization at six per. cent of 
net earnings from rail operations 

$501,656,100 

$446,339,000 

$130,610,100 

2. Market value of stocks and bonds 
deducting book value of physical 
property (“other investments”) 
and of securities of non-system 
corporations . 

367,517,805 

408,929,106 

115,486,516 

3. Average of 1 and 2. 

434,586,953 

427,634,053 

123,048,308 

A. North Dakota’s Share on Basis of 
Mileage of— 

1. 

113,625,107 

99,801,400 

53,275,860 

2. 

83,242,783 

91,436,548 

47,106,950 

3. 

98,433,945 

95,618,974 

50,191,405 

B. North Dakota’s Share on Basis of 
Gross Earnings of— 

1. 

87,639,321 

70,119,857 

*36,175,096 

2. 

64,205,361 

64,242,763 

$31,978,784 

3. 

75,922,341 

67,181,310 

34,076,940 

C. North Dakota’s Share on Basis of 
combination of Mileage and Gross 
Earnings (i. e., average of A and 
B)— 

1. 

100,632,214 

84,960,620 

44,725,478 

2. 

73,724,072 

77,829,656 

39,542,867 

3. 

87,178,143 

81,400,142 

42,134,173 


* This figure is obtained by capitalizing the total net earnings from rail 
operations, including Wisconsin Central, and apportioning to the share which 
gross earnings in North Dakota form of total gross earnings including Wiscon¬ 
sin Central. This is necessary because gross earnings excluding Wisconsin 
Central are not reported. 

t Not directly ascertainable. Estimated by reducing item B 1 to the same 
percentage by which item A 2 falls below A 1. 
























54 


ASSESSMENTS OF RAILROADS 


TABLE 9 

VALUATIONS PER MILE OF LINE AS BASED ON VARIOUS METHODS 

OF COMPUTATION 

Great Northern ' Soo 

j Northern Pacific [ Line 


I. North Dakota’s Share on Basis of 
its Share of Line Mileage— 

Method 1 . 

Method 2 . 

Method 3 . 

Average three methods. 

Average 1 and 3 . 

II. North Dakota’s Share on Basis of 
its Share of Gross Earnings— 

Method 1 . 

Method 2 . 

Method 3 . 

Average of three methods.... 

Average one and three. 

III. North Dakota’s Share on Basis of 
its Share of Net Earnings— 

Method 1 . 

Method 2 . 

Method 3 . 

Average of three methods.... 

Average 1 and 3 . 

North Dakota’s Share on Basis of Aver¬ 
age of I, II and III— 

Method 1 . 

Method 2 . 

Method 3 . 

Average three methods. 

Average 1 and 3 . 

North Dakota’s Share on Basis of Aver¬ 
age of I and II—■ 

Method 1 . 

Method 3 . 

Average 1 and 3 . 

Assessed Valuation per mile, 1913. 


$61,975 

$66,913 

$41,969 

63,479 

73,861 

43,569 

45,404 

61,305 

37,110 

56,951 

67,360 

40,883 

53,690 

64,109 

39,539 

47,802 

47,013 

28,507 

48,962 

51,894 


35,020 

43,073 

26,853 

43,928 

47,327 


41,411 

45,043 

27,680 

55,654 

54,045 

3CT, 641 

57,005 

5^9,657 

31,809 

40,773 

49,516 

27,093 

51,144 

54,406 

29,848 

48,214 

51,781 

28,867 

55,144 

55,991 

36,305 

56,482 

61,804 

37,689 

40,399 

51,298 

32,101 

50,675 

56,031 

35,365 

47,772 

53,645 

34,203 

54,889 

56,963 

35,238 

40,212 

52,189 

31.982 

47,551 

54,576 

33,407 

39,323 

38,429 



Explanation of Table 

. Mileage (end of 1914), used for computing averages per mile on estimated 
valuations and on assessment of 1914: N. P., 1,491.5; G. N., 1,833.4; Soo Line, 
1,269; (include line owned and line of proprietary and leased companies except 
for Soo). 

Mileage (end of 1913) used for computing averages per mile of assessment of 
1913: N. P., 1,453.3; G. N., 1,812.9; Soo Line, 1,240.8; (same basis as above). 

Figures into which these mileages were divided given in Tables 8 and 9. 

Method 1 is capitalization at 6 per cent of net rail operating revenues. 

Method 2 is capitalization at 6 per cent of total net revenue available for 
taxes and for payment of interest on bonds and dividends, excluding income 
from outside investment. 

Method 3 is market value of bonds and stocks, deducting outside investment. 

Soo Line figures exclude Wisconsin Central and are not available on basis 
of North Dakota’s share of gross earnings. 






































IN NORTH DAKOTA 


55 


TABLE 10-A 

GREAT NORTHERN RAI LWAY—TRACKAGE BY STATES AND TAXES 

Line Owned 



1909 

1910 

1912 

1913 

1914 

Total . 

6,368.5 

6,451.2 

6,553.4 

6,856.5 

6,902.8 

North Dakota ... 

1,544.5 

1,544.5 

1,596.0 

1,812.9 

1,833.4 

Wisconsin . 

37.5 

37.5 

37.5 

38.4 

38.5 

Minnesota . 

2,088.7 

2,110.8 

2,106.9 

2,104.4 

2,104.9 

South Dakota .... 

262.4 

262.4 

262.4 

262.4 

262.4 

Iowa . 

76.6 

76.6 

77.9 

77.9 

77.9 

Montana. 

1,459.5 

1,459.5 

1,513.3 

1,583.7 

1,583.6 

Idaho . 

81.6 

81.6 

81.6 

81.5 

104.7 

Washington . 

817.7 

878.4 

877.9 

895.4 

894.6 

Oregon . 






Canada . 













Line Operated 



1909 

1910 

1912 

1913 

1914 

Total . 

6,878.0 

7,146.8 

7,482.4 

7,750.2 

7,802.7 

North Dakota ... 

1,563.6 

1,563.6 

1,615.0 

1,812.9 

1,833.4 

Wisconsin . 

43.3 

43.3 

43.3 

44.3 

44.4 

Minnesota . 

2,094.8 

2,116.9 

2,114.9 

2,112.4 

2,113.C 

South Dakota .... 
Iowa. 

262.4 

262.4 

262.4 

77.9 

262.4 

77.9 

262.4 
77.1 
1,639.C 

Montana . 

1,474.4 

1,474.4 

1,528.2 

1,598.6 

Idaho . 

81.6 

81.6 

107.4 

107.3 

107.4 

Washington . 

847.0 

1,044.2 

1,061.6 

1,061.3 

1,060.4 

Oregon . 


8.5 

9.7 

9.8 

9.8 

Canada . 

510.9 

551.8 

661.9 

663.5 

655.C 







































56 


ASSESSMENTS OF RAILROADS 


TABLE 10-A—Continued 

GREAT NORTHERN RAI LWAY—TRACKAGE BY STATES AND TAXES 

Line Operated and Owned 



1909 

1910 

1912 

1913 

1914 

Total . 

6,271.3 

1,544.5 

37.5 

2,079.4 

262.4 

6,354.0 

1.544.5 
37.5 

2.101.5 
262.4 

6,535.7 

1.596.0 

37.5 
2,100.6 

262.4 
77.9 

1,513.3 

81.6 

866.5 

6.838.8 

1.812.9 

38.4 
2,098.1 

262.4! 

77.9 

1,583.7 

81.5 
884.0 

6,885.1 

1,833.4 

38.5 

2,098.7 

262.4 

77.9 

1,583.6 

107.4 
883.2 

North Dakota 
Wisconsin . 

Minnesota . 

South Dakota ... 
Tnwfl. 

Montana . 

1,459.5 

81.6 

806.4 

1,459.5 

81.6 

867.0 

Tda.ho .... 

Washington . 

Oregon .. 

Canada . 













Line Operated 


Proprietary and Leased Lines 



1909 

1910 

1912 

1913 

1914 

Total . 

504.8 

545.7 

622.5 

606.3 

623.7 

North Dakota ... 

Wi soon sin . 






Minnesota . 

1.8 

1.8 

1.8 

1.8 

1.8 

South Dakota ... 



Iowa 


* 




Montana . 





43.0 

Tdahn . 



25.8 

25.8 

TVa.shington . 



17.8 


Oregon . 





Canada. 

503.0 

543.9 

577.1 

1 

578.7 

578.9 


















































IN NORTH DAKOTA 


57 


TABLE 10-A— Continued 

GREAT NORTHERN RAI LWAY—TRACKAGE BY STATES AND TAXES 

Total Owned 


Plus Proprietary and Leased Lines 



1909 

1910 

| 1912 

1913 

1914 

Total . 

6,873.3 

6,996.9 

7,175.9) 

7,462.8 

7,526.5 

North Dakota ... 

1,544.5 

1,544.5 

1,596.0 

1,812.9 

1,833.4 

Wisconsin . 

37.5 

37.5 

37.5 

38.4 

38.5 

Minnesota . 

2,090.5 

2,112.6 

2,108.7 

2,106.2 

2,106.7 

South Dakota ... 

262.4 

262.4 

262.4 

262.4 

262.4 

Iowa . 

76.6 

76.6 

77.9 

77.9 

77.9 

Montana . 

1,459.5 

1,459.5 

1/513.3 

1,583.7 

1,626.6 

Idaho . 

81.6 

81.6 

107.4 

107.3 

107.4 

Washington . 

817.7 

878.4 

895.7 

895.4 

894.6 

Oregon . 






Canada . 

503.0 

543.0 

577.1 

578.7 

578.9 


Taxes Accrued 



1909 

1910 

1912 

1913 

1914 

Total. 

*$2,553,436 

| *$3,545,278 

*$3,486,572 

| *$4,276,898 

*$4,790,573 

North Dakota ... 

$533,146 

$590,965 

$613,818 

$692,991 

$778,139 

Wisconsin . 

118,495 

72,949 

129,734 

134,351 

155,974 

Minnesota . 

680,266 

1,029,032 

1,083,270 

1,419,512 

1,505,601 

South Dakota ... 

53,190 

63,898 

50,014 

69,516 

79,721 

Tnwfl. 



19,327 

30,061 

25,351 

Montana . 

425,462 

498,999 

618,807 

714,385 

804,805 

Idaho . 

31,600 

51,667 

76,601 

90,626 

82,567 

Washington . 

669,032 

944,943 

663,992 

871,192 

1,073,040 

Oregon . 



200 

17 

100 

Canada . 

42,243 

59,209 

70,362 

92,859 

90,253 


* Total includes federal taxes: $133,610 in 1910, $160,418 in 1912, $161,388 in 

1913, and $195,021 in 1914. 














































58 


ASSESSMENTS QF RAILROADS 


TABLE 10-B 

NORTHERN PACI FIC—TRACKAGE BY STATES AND TAXES 


Line Owned 



1909 

1910 

1912 

1913 

1914 

Total . 

6,218.8 

6,258.0 

6,483.5 

*6,145.8 

6,756.7 

North Dakota ... 

1,183.6 

1,184.1 

1,310.2 

1,273.2 

1,491.5 

Wisconsin . 

144.6 

145.8 

144.4 

143.9 

145.4 

Minnesota . 

1,032.7 

1,033.8 

1,040.1 

1,029.4 

1,072.9 

Montana . 

1,404.2 

1,435.4 

1,446.4 

1,393.0 

1,475.2 

Idaho . 

343.1 

343.2 

342.2 

207.0 

338.4 

Washington . 

1,665.0 

1,670.6 

1,755.7 

1,651.8 

1,785.5 

Oregon . 

89.9 

89.5 

88.9 

88.7 

89.1 

^Manitoba . 

355.6 

355.6 

355.6 

358.8 

358.8 


Line Operated (Total) 



1909 

1910 

1912 

1913 

1914 

Total . 

6,087.4 

6,188.9 

6,420.0 

6,683.6 

6,665.5 

North Dakota . .. 

1,184.2 

1,184.7 

1,310.8 

1,453.9 

1,485.8 

Wisconsin . 

145.2 

146.2 

145.3 

144.8 

146.3 

Minnesota . 

1,047.1 

1,048.5 

1,055.2 

1,053.9 

1,053.8 

Montana . 

1,492.0 

1,523.6 

1,538.5 

1,577.2 

1,561.1 

Idaho . 

343.4 

345.0 

344.2 

342.5 

340.2 

Washington . 

1,779.2 

1,880.5 

1,965.5 

1,977.8 

1,945.3 

Oregon . 

96.3 

60.1 

60.4 

59.9 

59.1 

Manitoba . 




73.7 

73.7 






* The apparent decrease in miles of line owned in 1913 is due to the inclusion 
of 530 miles of line formerly reported as “owned” in column “Line of proprietary 
companies.” This 530 miles included 143.56 miles of the Mo. River Ry. Co., 
91.35 miles of the Western Dakota Ry. Co., 170.66 miles of the Clearwater 
Shortline Ry., and other short branch lines. In 1914 these were again classified 
as “owned” line and the “Line of proprietary companies” fell to .25, miles owned 
by the Duluth Union Depot Co. 

t 355.6 miles leased to government of Manitoba. 








































IN NORTH DAKOTA 


59 


TABLE 10-B— Continued 

NORTHERN PACI FIC—TRACKAGE BY STATES AND TAXES 


Line Operated and Owned 



1909 

1910 

1912 

1913 

1914 

Total . 

5,831.0 

5,834.3 

6,.062.3 

5,722.9 

6,243.2 

North Dakota ... 

1,183.6 

1,184.1 

1,310.2 

1,273.2 

1,485.2 

Wisconsin . 

144.6 

145.8 

144.4 

143.8 

145.4 

Minnesota . 

1,032.7 

1,033.8 

1,040.1 

1,029.4 

1,039.1 

Montana. 

1,309.2 

1,421.3 

1,433.9 

1,378.9 

1,466.0 

Idaho . 

343.1 

343.2 

342.2 

207.0 

338.4 

Washington . 

1,646.9 

1,652.5 

1,737.6 

1,633.7 

1,713.0 

Oregon . 

89.9 

53.6 

53.8 

53.6 

52.9 

Manitoba . 

- 



3.2 

3.2 








Line Operated 

Proprietary and Leased Lines 



1909 

1910 

1912 

1913 

1914 

Total . 

194.6 

195.1 

195.0 

726.3 

180.1 

186.9 

North Dakota 

Wisconsin . 





Minnesota . 




9.4 

157.5 

133.4 

245.8 

.2 

56.2 

Montana . 

64.0 

64.4 

64.3 

Idaho . 

Washington . 

130.7 

130.6 

130.7 

130.5 

Oregon . 

Manitoba . 




















































60 


ASSESSMENTS OF RAILROADS 


TABLE 10-B— Continued 

NORTHERN PACI FIC—TRACKAGE BY STATES AND TAXES 


Total Owned 

Plus Proprietary and Leased Lines 



1909 

1910 

1912 

1913 

1914 

Total . 

6,413.4 

6,453.1 

6,678.5 

6,872.1 

6,943.6 

North Dakota ... 

1,183.6 

1,184.1 

1,310.2 

1,453.3 

1,491.5 

Wisconsin . 

144.6 

145.8 

144.4 

143.9 

145.4 

Minnesota . 

1,032.7 

1,033.8 

1,040.1 

1,038.8 

1,0?3.1 

Montana. 

1,468.2 

1,499.8 

1,510.7 

1,550.5 

1,531.4 

Idaho . 

343.1 

343.2 

342.2 

340.4 

338.4 

Washington . 

1,795.7 

1,801.2 

1,886.4 

1,897.6 

1,916.0 

Oregon . 

89.9 

89.5 

88.9 

88.7 

89.1 

Manitoba . 

355.6 

355.6 

355.6 

358.8 

358.8 


State Taxes Accrued 



1909 

1910 

1912 

1913 

1914 

Total . 

$2,547,835 

$3,622,000 

$3,739,079 

$3,999,028 

$5,030,584 

North Dakota ... 

$329,657 

$431,766 

$445,344 

$469,957 

$521,453 

Wisconsin . 

32,966 

39,876 

38,977 

41,107 

52,088 

Minnesota . 

578,684 

616,187 

663,993 

866,730 

923.621 

Montana. 

428,354 

615,806 

652,928 

696,820 

741,329 

Idaho . 

82,314 

144,046 

224,384 

200,874 

348,259 

Washington . 

1,070,903 

1,543,255 

1,498,011 

1,426,446 

2,193,376 

Oregon . 

24,744 

29,612 

32,537 

29,461 

29,142 

Manitoba. 




5,976 

14,977 

Corporation Tax, 




U. S. 


201,197 

182,492 

261,327 

206,078 

Taxes on Outside 


Offices . 

182 

254 

413 

280 

260 














































IN NORTH DAKOTA 


61 


TABLE 10-C 

MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAILWAY- 
TRACKAGE BY STATES AND TAXES 

Line Owned 



1909 

1910 

1912 

1913 

1914 

Total . 

2.434.7 

1.110.7 
248.8 
353.0 
688.6 

33.6 

2,555.4 

1,110.7 

239.8 

371.7 

799.6 

33.6 

2,718.9 

1,109.8 

239.5 

378.9 

957.7 

35.6 

2,921.6 

1,240.8 

239.5 
420.2 

987.6 
33.6 

3,019.9 

1,269.4 

240.4 

420.2 

999.2 
33.6 
57.2 

North Dakota ... 
Michigan . 

Wisconsin . 

Minnesota . 

South Dakota ... 
Montana . 

Illinois . 












Line Operated (Total)* 



1909 

1910 

1912 

1913 

1914 

Total . 

2,395.0 

3,529.0 

3,773.4 

3,976.0 

4,101.6 

North Dakota 

1,110.7 

1,110.7 

1,109.8 

1,240.8 

1,269.4 

Michigan . 

250.7 

248.6 

248.3 

248.3 

248.2 

Wisconsin . 

353.0 

1,316.2 

1,336.7 

1,378.0 

1,394.3 

Minnesota . 

646.9 

756.8 

981.9 

1,012.3 

1,042.4 

South Dakota ... 
Montana . 

33.6 

33.6 

33.6 

33.6 

33.6 

57.2 

Illinois . 


63.0 

63.1 

63.1 

56.6 


Line Operated and Owned 



1909 

1910 

1912 | 1913 1 1914 

1 1 

Total . 

2,375.8 

1,110.7 

248.7 
353.0 

629.7 
33.6 

2,472.1 

1.110.7 

239.8 

371.7 

716.2 

33.6 

Same as “Line Owned” 

tt a 

a a 

a a 

a a 

a a 

a a 

North Dakota ... 
Michigan . 

Wisconsin . 

Minnesota . 

South Dakota ... 
Montana . 

Illinois . 







* A small amount of line is operated under trackage rights: in 1914, 64.2 
miles, of which none was in North Dakota. No line of proprietary companies. 
No leased line. Wisconsin Central, operated under contract, pays its own taxes. 

























































62 


ASSESSMENTS OF RAILROADS 


TABLE 10-C—Continued 

MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAILWAY- 
TRACKAGE BY STATES AND TAXES 


Operated Under Contract 



1909 

1910 

1912 

191$ 

1914 

Total . 


1,038.0 

984.6 

984.6 

1,017.5 

North Dakota ... 




Michigan . 


6.9 

6.9 

6.9 

6.9 

Wisconsin . 


944.3 

920.8 

920.8 

935.8 

Minnesota . 


23.7 

8.2 

8.2 

26.2 

South Dakota 






Illinois . 


63.1 

48.7 

48.7 

48.7 


Taxes Accrued- 

—State 




1909 

1910 

1912 

1913 

1914 

Total . 

$873,093 

$908,079 

$1,086,966 

$1,235,088 

$1,144,317 

North Dakota ... 

$301,000 

$338,944 

$362,421 

$377,330 

$366,647 

Michigan . 

117,000 

136,444 

137,746 

138,340 

126,380 

Wisconsin . 

133.000 

128,287 

124,853 

154,357 

172,150 

Minnesota . 

206,430 

237,791 

310,245 

410,262 

475,591 

South Dakota ... 

3,200 

3,223 

3,429 

3,525 

3,549 

Taxes over-estimat- 






fid . 

112,463 

20,372 

148,272 

$151,275 





$ Marked “Tax accruals not paid.” 









































GREAT NORTHERN RAILWAY—INCOM E ACCOUNT 


IN NORTH DAKOTA 


✓ 


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64 


ASSESSMENTS OF RAILROADS 


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IN NORTH DAKOTA 


65 


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MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAI LW A Y—I NCOM E ACCOUNT 


66 


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IN NORTH DAKOTA 


67 


TABLE 12-A 

GREAT NORTHERN RAILWAY 


General Balance Sheet—Assets 



1912 

1913 

1914 

Property Investment— 

l. Road and Equipment to 1907— 

Road . 

$230,947,771 

$230,947,771 

$230,947,771 

Equipment . 

44,084,374 

44,084,374 

44,084,374 

Total . 

$275,032,145 

$275,032,145 

$275,032,145 

Since 1907- 

Road . 

$47,197,968 

$63,740,166 

$72,298,266 

Equipment . 

17,112,519 

24,675,711 

28,116,917 

General Expenditures . 

1,200,499 

1,491,220 

1,887,576 

Total . 

$65,510,986 

$89,907,096 

$102,302,760 

Total Road and Equipment. 

$340,543,131 

$364,939,241 

$377,334,905 

Less reserve for depreciation. 

21,552,810 

23,594,984 

25,804,746 

Net Total Road and Equipment. 

318,990,321 

341,344,257 

351,530,158 

2. Securities— 

Stocks of proprietary and affiliat¬ 
ed companies, pledged. 

31,850,538 

31,481,049 

33,557,338 

Bonds of G. N. Co. pledged. 

14,106,000 

14,106,000 

14,106,000 

Stocks of proprietary and affiliat¬ 
ed companies unpledged . 

1,704,102 

3,194,100 

3,104,100 

Total Securities . 

$47,660,641 

$48,781,149 

$50,767,439 

3. Other Investments— 

Advances to proprietary and affil¬ 
iated companies . 

$1,646,759 

$449,704 

$148,451 

Physical Property . 

3,985,622 

5,111,344 

4,767,020 

Securities, pledged . 

109,764,810 

109,764,810| 

111,514,810 

Securities, unpledged . 

31,192,860 

31,265,328 

33,314.608 

Total other Investments. 

$146,590,051 

$146,591,186 

$149,744,888 

Working Assets— 

Cash . 

$12,829,135 

$5,116,814 

$5,507,710 

Securities issued or assumed—■ 
Held in treasury . 

16,832,250 

28,156,244 

35,691,554 

Marketable securities . 

24.980,873 

27,618,412) 

28,918.547 

All other. 

17,947,085 

19,977,635 

20,725,266 

Total working assets . 

$72,616,343 

$80,869,105 

$90,843,077 

Accrued Income not due . 

406,667 

3,538,319 


491,400 

8,110,506 

Deferred Debit Items . 

3,541,066 

Total Assets . 

I $589,802,341 

| $621,126,764 

! $651,487,468 











































68 


ASSESSMENTS OF RAILROADS 


TABLE 12-A—Continued 

GREAT NORTHERN RAILWAY 

General Balance Sheet—Liabilities 



1912 

1913 

1914 

Stock— 

Held by Company. 

$9,250 

$9,250 

$146,800 

Not held by Company. 

$209,981,420 

$209,981,420 

$230,819,320 

Receipts for Installments paid. 

80 

12,958,626 

7,854,373 

Total . 

$209,990,750 

$222,949,296 

$238,820,493 

Mortgage, Bonded, and Secured Debt— 
Mortgage Bonds— 

Held by Company . 

$30,929,000 

$42,175,000 

$49,646,000 

Not held by Company. 

143,757,909 

143,655,909 

143,478,909 

Total . 

$174,686,909 

$185,830,909 

$193,124,909 

Collateral Trust Bonds . 

107,613,500 

107,613,500 

107,613,500 

Total Funded Debt . 

Working Liabilities . 

$282,300,409 

$18,892,040 

$293,444,409 

$15,872,186 

$300,738,409 

$18,541,523 

Accrued Liabilities not Due. 

1,666,492 

2,286,359 j 

2,206,787 

Deferred Credit Items . 

1,110,325 

1,296,595 

1,483,892 

Appropriated Surplus— 

Additions to property since 1907 through 
income . 

11,862,129 

15,081,189 

18,631,599 

Reserves from income or surplus. 

6,798,062 

8,721,599 

5,965,521 

Total . 

$18,660,191 

$23,802,788 

$24,597,120 

Profit and Loss, Surplus. 

57,182,134 

61,474,131 

65,099,244 

Total Liabilities . 

$539,802,341 

$621,126,764 

$651,487,468 


























IN NORTH DAKOTA 


69 


TABLE 12-B 

NORTHERN PACIFIC RAILWAY 


General Balance Sheet—Assets 



1912 

1913 

1914 

Property Investment— 

1. Road and Equipment to 1907— 




Road (N. P. estate) . 

$315,838,962 

$315,838,962 

$315,838, 

Equipment . 

37,295,670 

37,295,670 

37,295, 

Total . 

$353,134,632 

$353,134,632 

$353,134, 

Since 1907— 




Road . 

$45,935,417 

$52,834,469 

$93,550, 

Equipment . 

11,983,502 

19,075,529 

73,113, 

General Expenditures . 

321,986 

385,243 

412, 

Land Department, current assets 

4.233,049 

5,691,526 

7,327, 

Total . 

$62,473,955 

$77,986,766 

$124,403, 

Total Road and Equipment. 

$415,608,586 

$431,121,398 

$477,537, 

Less reserve for depreciation.... 

11,201,799 

12,263,012 

13,491, 

Net total Road and Equipment. 

404,406,787 

418,958,386 

464,046, 

2. Securities— 

Of proprietary and affiliated Com¬ 




panies, unpledged— 




Stocks . 

$23,274,431 

$25,442,831 

$22,370, 

Bonds . 

23,345,519 

22,314,425 

22,315, 

Total Securities . 

$46,619,949 

$47,757,256 

$44,685, 

3. Other Investments— 

Advanced to proprietary and affil¬ 




iated companies . 

$22,665,563 

$22,642,067 

$958, 

Physical Property . 

1,373,800 

1,755,184 

2,004, 

Securities Pledged . 

Securities Unpledged . 

111,609,810 

111,609,810 

111,609, 

227, 

$114,800, 

Total other Investments . 

$135,649,172 

$136,007,060 

Working Assets— 




Cash . 

$5,566,568 

$3,457,972 

$6,595, 

Securities issued or assumed— 

1 



Held in treasury . 

17,434,500 

13,560,500 

9,203, 

Marketable Securities . 

14,959,511 

12,065,080 

12,069, 

All other. 

16,442,041 

20,441,673 

20,225, 

Total Working Assets . 

$54,402,620' 

$49,525,225 

$48,094, 

Accrued Income not due. 

596,268 

160,185 

569, 

Deferred Debit Items . 

6,445,359 

6,403,707 

7,358, 

Total Assets . 

$648,120,156 

$658,811,819 

$679,553, 


4 

8,902 

5,670 

4,632 

0,121 

3,772 

2,403 

7,032 

3,329 

7,961 

1,812 

5,149 

0,251 

5,275 

5,526 

8,701 

4,811 

9,810 

7,100 

0,422 

5,904 

3,500 

9,080 

5,539 

4,023 

9,672 

8,134 

3,926 






































70 


ASSESSMENTS OF RAILROADS 


TABLE 12-B—Continued 

NORTHERN PACIFIC RAILWAY 

General Balance Sheet—Liabilities 



1912 

1913 

1914 

Stock— 




Held by the Company . 

$54,000 

$54,000 

$54,000 

Not held by the Company. 

247,944,400’ 

247,944,400 

247,944,400 

Receipts for installments paid. 

1,600 

1,600 

1,600 

Total . 

$248,000,000 

$248,000,000 

$248,000,000 

Mortgage, Bonded, and Secured Debt— 




Mortgage Bonds— 




Held by Company . 

$15,241,500 

$12,235,500 

$7,878,500 

Not held by Company . 

176,124,000 

180,117,000 

186,859,000 

Total . 

$191,365,500 

$192,352,500 

$194,737,500 

Collateral Trust Bonds— 




Held by Company . 

$2,139,000 

$1,271,000 

$1,271,000 

Not held by Company . 

105,474,500 

106,342,500 

106,342,500 

Total . 

$107,613,500 

$107,613,500 

$107,613,500 

Total Funded Debt . 

$298,979,000 

$299,966,000 

$302,351,000 

Working Liabilities . 

8,345,367 

11,492,032 

19,876,369 

Accrued Liabilities not due. 

6,801,569 

7,014,954 

7,490,544 

Deferred Credit Items . 

191,264 

2,237,285 

5,133,725 

Appropriated Surplus— 




Additions to property since 1907 




(through income) . 



5,643,200 

Reserves from income or surplus. 

. 5,542,517 

6,401,778 

6,286,628 

Total . 

$5,542,517 

$6,401,778 

$11,928,828 

Profit and Loss Surplus . 

80,260,438 

83,699,770 

84,772,460 

Total Liabilities . 

$648,120,156 

$658,811,819 

$679,553,926 





























IN NORTH DAKOTA 


71 


TABLE 12-C 

MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAILWAY 

General Balance Sheet—Assets 



1912 

1913 

1914 

Property Investment— 




1. Road and Equipment to 1907— 




Road . 

$62,090,906 

$63,020,149 

$63,020,149 

Equipment . 

13,887,941 

13,834,144 

13,834,144 

Total . 

$75,978,847 

$76,854,293 

$76,854,293 

Since 1907— 




Road . 

$20,508,856 

$26,224,638 

$29,088,117 

Equipment . 

2,837,061 

6,685,019 

7,025,417 

General Expenditures . 

759,831 

807,114 

- 832,339 

Total . 

$24,105,747 

$33,716,770 

$36,945,873 

Total Road and Equipment. 

$100,084,595 

$110,571,064 

$113,800,166 

Less reserve for depreciation.... 

1,461,477 

1,592,246 

2,275,693 

Net total Road and Equipment. 

$98,623,118 

$108,978,818 

$111,524,473 

2. Securities— 




Of proprietary and affiliated com¬ 




panies, stocks pledged . 

*$11,148,700 

$11,169,000 

$11,169,000 

Of proprietary and affiliated com¬ 




panies, stocks unpledged. 

4,557,811 

5,035,028 

5,325,028 

Of proprietary and affiliated com¬ 




panies, funded debt unpledged.. 

859,637 

828,630 

2,075,432 

Total Securities . ... 

*$16,566,148 

$17,032,657 

$18,570,060 

3. Other Investments— 




Advances to proprietary and affil¬ 




iated companies . 

$5,547,432 



Physical property . 

244,633 

2,410,245 

2,400,339 

Securities, pledged and unpledged 

25,200 

25,351 

25,351 

Total other Investments . 

$5,817,432 

$2,435,596 

$2,425,690 

Working Assets— 




Cash . 

$5,271,256 

$3,357,524 

$4,479,428 

Securities issued or assumed— 




Held in treasury . 

10,000 

2,691,000 


Marketable Securities . 

8,700 

133,700 

8,700 

All other . 

5,342,644 

5,784,025 

4,713,827 

Total Working Assets . 

$10,632,600 

$11,966,249 

$9,201,955 

Accrued Income not due . 

123,507 

123,951 

128,782 

Deferred Debit Items . 

3,467,154 

3,389,992 

3,310,346 

Total Assets . 

$124,081,258 

$143,927,264 

$145,161,305 

Add.... 

*11,148,700 




$135,229,958 




* The item of $11,148,700, preferred stock of the Wisconsin Central, does 
not appear in balance sheet of 1912, but is shown for 1912 in Compar. Bal. Sheet 
of 1913. See also page 48. Report of 1912. Totals charged accordingly. 











































72 


ASSESSMENTS OF RAILROADS 


TABLE 12-C—Continued 

MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAILWAY 

General Balance Sheet—Liabilities 


T 

1912 

1913 

1914 

Stock— 





$25,206,800 

12,603,400 

$25,206,800 

12,603,400 

12,336 

$37,822,536 

$25,206,800 

12,603,400 

12,366 

$37,822,536 

Preferred . 

Premiums realized . 

Total (None held by Company).... 

$37,810,200 

Mortgage, Bonded, and Secured Debt— 




Mortgage Bonds— 




"Held bv Compa.nv. 

10,000 

64,205,000 

$64,215,000 

2,691,000 

64,147,000 

$66,838,000 


Not held by Company. 

68,785,000 

$68,785,000 

Total . 

Collateral Trust bonds (not held by 

Company) . 

$$11,148,700 

$11,169,000 

$11,169,600 

Equipment trust obligations (not held 

by company) . 

4,051,000 

$$79,414,700 

$5,424,354 

600,583 

31,650 

6,695,000 

$84,792,000 

$5,744,450 

749,628 

7,057,000 

$87,011,600 

$4,735,386 

643,287 

371,606 

Total Funded Debt . 

Working Liabilities . 

Accrued Liabilities not due . 

Deferred Credit Items . 

226,868 

Appropriated Surplus— 

Not spenifica.llv invested . 

241,125 

11,707,346 

$124,081,258 

11,148,700 

$$135,229,958 

213,314 

14,468,468 

$143,927,264 


Profit and Loss Surplus . 

14,576,890 

$145,161,305 

Total Liabilities . 

Add.... 







$ Leased line certificates for Wisconsin Central preferred stock, $11,148,700, 
not shown in balance sheet in state report. 































Income and Operating Statistics 
of 


Great Northern, Northern Pacific and 
Minneapolis, St. Paul and Sault Ste. Marie 

Railways 







GREAT NORTHERN R Al LWAY—INCOM E AND OPERATING STATISTICS 


74 


ASSESSMENTS OF RAIEROADS 


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